Correlation Between Exide Industries and Rico Auto

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Can any of the company-specific risk be diversified away by investing in both Exide Industries and Rico Auto at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Exide Industries and Rico Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exide Industries Limited and Rico Auto Industries, you can compare the effects of market volatilities on Exide Industries and Rico Auto and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Exide Industries with a short position of Rico Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exide Industries and Rico Auto.

Diversification Opportunities for Exide Industries and Rico Auto

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Exide and Rico is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Exide Industries Limited and Rico Auto Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rico Auto Industries and Exide Industries is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Exide Industries Limited are associated (or correlated) with Rico Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rico Auto Industries has no effect on the direction of Exide Industries i.e., Exide Industries and Rico Auto go up and down completely randomly.

Pair Corralation between Exide Industries and Rico Auto

Assuming the 90 days trading horizon Exide Industries Limited is expected to generate 0.73 times more return on investment than Rico Auto. However, Exide Industries Limited is 1.37 times less risky than Rico Auto. It trades about 0.07 of its potential returns per unit of risk. Rico Auto Industries is currently generating about 0.0 per unit of risk. If you would invest  28,225  in Exide Industries Limited on August 24, 2024 and sell it today you would earn a total of  13,310  from holding Exide Industries Limited or generate 47.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.59%
ValuesDaily Returns

Exide Industries Limited  vs.  Rico Auto Industries

 Performance 
       Timeline  
Exide Industries 

Risk-Adjusted Performance

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Over the last 90 days Exide Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
Rico Auto Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Rico Auto Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Exide Industries and Rico Auto Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exide Industries and Rico Auto

The main advantage of trading using opposite Exide Industries and Rico Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exide Industries position performs unexpectedly, Rico Auto can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Rico Auto will offset losses from the drop in Rico Auto's long position.
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The idea behind Exide Industries Limited and Rico Auto Industries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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