Correlation Between Indian Metals and RHI MAGNESITA
Can any of the company-specific risk be diversified away by investing in both Indian Metals and RHI MAGNESITA 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 Indian Metals and RHI MAGNESITA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indian Metals Ferro and RHI MAGNESITA INDIA, you can compare the effects of market volatilities on Indian Metals and RHI MAGNESITA 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 Indian Metals with a short position of RHI MAGNESITA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Metals and RHI MAGNESITA.
Diversification Opportunities for Indian Metals and RHI MAGNESITA
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Indian and RHI is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and RHI MAGNESITA INDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RHI MAGNESITA INDIA and Indian Metals 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 Indian Metals Ferro are associated (or correlated) with RHI MAGNESITA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RHI MAGNESITA INDIA has no effect on the direction of Indian Metals i.e., Indian Metals and RHI MAGNESITA go up and down completely randomly.
Pair Corralation between Indian Metals and RHI MAGNESITA
Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 1.59 times more return on investment than RHI MAGNESITA. However, Indian Metals is 1.59 times more volatile than RHI MAGNESITA INDIA. It trades about 0.11 of its potential returns per unit of risk. RHI MAGNESITA INDIA is currently generating about -0.03 per unit of risk. If you would invest 28,462 in Indian Metals Ferro on October 16, 2024 and sell it today you would earn a total of 58,058 from holding Indian Metals Ferro or generate 203.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
Indian Metals Ferro vs. RHI MAGNESITA INDIA
Performance |
| Timeline |
| Indian Metals Ferro |
| RHI MAGNESITA INDIA |
Indian Metals and RHI MAGNESITA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indian Metals and RHI MAGNESITA
The main advantage of trading using opposite Indian Metals and RHI MAGNESITA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Metals position performs unexpectedly, RHI MAGNESITA 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 RHI MAGNESITA will offset losses from the drop in RHI MAGNESITA's long position.| Indian Metals vs. Eros International Media | Indian Metals vs. Tata Communications Limited | Indian Metals vs. Beta Drugs | Indian Metals vs. Cyber Media Research |
| RHI MAGNESITA vs. Gallantt Ispat Limited | RHI MAGNESITA vs. Indian Metals Ferro | RHI MAGNESITA vs. Tamilnadu Telecommunication Limited | RHI MAGNESITA vs. The Hi Tech Gears |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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