Correlation Between Reliance Communications and Eros International
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By analyzing existing cross correlation between Reliance Communications Limited and Eros International Media, you can compare the effects of market volatilities on Reliance Communications and Eros International 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 Reliance Communications with a short position of Eros International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Communications and Eros International.
Diversification Opportunities for Reliance Communications and Eros International
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Reliance and Eros is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Communications Limite and Eros International Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eros International Media and Reliance Communications 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 Reliance Communications Limited are associated (or correlated) with Eros International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eros International Media has no effect on the direction of Reliance Communications i.e., Reliance Communications and Eros International go up and down completely randomly.
Pair Corralation between Reliance Communications and Eros International
Assuming the 90 days trading horizon Reliance Communications Limited is expected to under-perform the Eros International. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Communications Limited is 1.3 times less risky than Eros International. The stock trades about -0.47 of its potential returns per unit of risk. The Eros International Media is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 1,628 in Eros International Media on August 29, 2024 and sell it today you would lose (100.00) from holding Eros International Media or give up 6.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reliance Communications Limite vs. Eros International Media
Performance |
| Timeline |
| Reliance Communications |
| Eros International Media |
Reliance Communications and Eros International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Communications and Eros International
The main advantage of trading using opposite Reliance Communications and Eros International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Communications position performs unexpectedly, Eros International 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 Eros International will offset losses from the drop in Eros International's long position.The idea behind Reliance Communications Limited and Eros International Media 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.
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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