Correlation Between Rajnandini Metal and Indian Metals

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Can any of the company-specific risk be diversified away by investing in both Rajnandini Metal and Indian Metals 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 Rajnandini Metal and Indian Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rajnandini Metal Limited and Indian Metals Ferro, you can compare the effects of market volatilities on Rajnandini Metal and Indian Metals 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 Rajnandini Metal with a short position of Indian Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rajnandini Metal and Indian Metals.

Diversification Opportunities for Rajnandini Metal and Indian Metals

-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between Rajnandini and Indian is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Rajnandini Metal Limited and Indian Metals Ferro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Metals Ferro and Rajnandini Metal 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 Rajnandini Metal Limited are associated (or correlated) with Indian Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Metals Ferro has no effect on the direction of Rajnandini Metal i.e., Rajnandini Metal and Indian Metals go up and down completely randomly.

Pair Corralation between Rajnandini Metal and Indian Metals

Assuming the 90 days trading horizon Rajnandini Metal Limited is expected to generate 0.65 times more return on investment than Indian Metals. However, Rajnandini Metal Limited is 1.54 times less risky than Indian Metals. It trades about -0.19 of its potential returns per unit of risk. Indian Metals Ferro is currently generating about -0.35 per unit of risk. If you would invest  893.00  in Rajnandini Metal Limited on November 2, 2024 and sell it today you would lose (85.00) from holding Rajnandini Metal Limited or give up 9.52% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Rajnandini Metal Limited  vs.  Indian Metals Ferro

 Performance 
       Timeline  
Rajnandini Metal 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Rajnandini Metal Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Indian Metals Ferro 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indian Metals may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Rajnandini Metal and Indian Metals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rajnandini Metal and Indian Metals

The main advantage of trading using opposite Rajnandini Metal and Indian Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rajnandini Metal position performs unexpectedly, Indian Metals 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 Indian Metals will offset losses from the drop in Indian Metals' long position.
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The idea behind Rajnandini Metal Limited and Indian Metals Ferro 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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