Correlation Between Reliance Industries and REC
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By analyzing existing cross correlation between Reliance Industries Limited and REC Limited, you can compare the effects of market volatilities on Reliance Industries and REC 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 Industries with a short position of REC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Industries and REC.
Diversification Opportunities for Reliance Industries and REC
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Reliance and REC is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Limited and REC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REC Limited and Reliance 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 Reliance Industries Limited are associated (or correlated) with REC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REC Limited has no effect on the direction of Reliance Industries i.e., Reliance Industries and REC go up and down completely randomly.
Pair Corralation between Reliance Industries and REC
Assuming the 90 days trading horizon Reliance Industries Limited is expected to generate 0.44 times more return on investment than REC. However, Reliance Industries Limited is 2.3 times less risky than REC. It trades about 0.15 of its potential returns per unit of risk. REC Limited is currently generating about -0.2 per unit of risk. If you would invest 121,800 in Reliance Industries Limited on November 7, 2024 and sell it today you would earn a total of 4,710 from holding Reliance Industries Limited or generate 3.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reliance Industries Limited vs. REC Limited
Performance |
| Timeline |
| Reliance Industries |
| REC Limited |
Reliance Industries and REC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Industries and REC
The main advantage of trading using opposite Reliance Industries and REC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Industries position performs unexpectedly, REC 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 REC will offset losses from the drop in REC's long position.The idea behind Reliance Industries Limited and REC Limited 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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