Correlation Between REC and Indian Railway
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By analyzing existing cross correlation between REC Limited and Indian Railway Finance, you can compare the effects of market volatilities on REC and Indian Railway 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 REC with a short position of Indian Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of REC and Indian Railway.
Diversification Opportunities for REC and Indian Railway
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between REC and Indian is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding REC Limited and Indian Railway Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Railway Finance and REC 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 REC Limited are associated (or correlated) with Indian Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Railway Finance has no effect on the direction of REC i.e., REC and Indian Railway go up and down completely randomly.
Pair Corralation between REC and Indian Railway
Assuming the 90 days trading horizon REC Limited is expected to under-perform the Indian Railway. In addition to that, REC is 1.11 times more volatile than Indian Railway Finance. It trades about -0.2 of its total potential returns per unit of risk. Indian Railway Finance is currently generating about -0.06 per unit of volatility. If you would invest 14,542 in Indian Railway Finance on November 7, 2024 and sell it today you would lose (758.00) from holding Indian Railway Finance or give up 5.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
REC Limited vs. Indian Railway Finance
Performance |
| Timeline |
| REC Limited |
| Indian Railway Finance |
REC and Indian Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with REC and Indian Railway
The main advantage of trading using opposite REC and Indian Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REC position performs unexpectedly, Indian Railway 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 Railway will offset losses from the drop in Indian Railway's long position.| REC vs. Shree Pushkar Chemicals | REC vs. Hindcon Chemicals Limited | REC vs. Indo Borax Chemicals | REC vs. Bajaj Holdings Investment |
| Indian Railway vs. Alkali Metals Limited | Indian Railway vs. Manaksia Coated Metals | Indian Railway vs. Ankit Metal Power | Indian Railway vs. Rajnandini Metal Limited |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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