Correlation Between Reliance Industries and Centrica PLC
Can any of the company-specific risk be diversified away by investing in both Reliance Industries and Centrica PLC 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 Reliance Industries and Centrica PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reliance Industries Ltd and Centrica PLC, you can compare the effects of market volatilities on Reliance Industries and Centrica PLC 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 Centrica PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Industries and Centrica PLC.
Diversification Opportunities for Reliance Industries and Centrica PLC
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Reliance and Centrica is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Ltd and Centrica PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrica PLC 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 Ltd are associated (or correlated) with Centrica PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrica PLC has no effect on the direction of Reliance Industries i.e., Reliance Industries and Centrica PLC go up and down completely randomly.
Pair Corralation between Reliance Industries and Centrica PLC
Assuming the 90 days trading horizon Reliance Industries Ltd is expected to under-perform the Centrica PLC. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Industries Ltd is 1.04 times less risky than Centrica PLC. The stock trades about -0.06 of its potential returns per unit of risk. The Centrica PLC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 12,370 in Centrica PLC on September 1, 2024 and sell it today you would earn a total of 370.00 from holding Centrica PLC or generate 2.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reliance Industries Ltd vs. Centrica PLC
Performance |
| Timeline |
| Reliance Industries |
| Centrica PLC |
Reliance Industries and Centrica PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Industries and Centrica PLC
The main advantage of trading using opposite Reliance Industries and Centrica PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Industries position performs unexpectedly, Centrica PLC 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 Centrica PLC will offset losses from the drop in Centrica PLC's long position.| Reliance Industries vs. Compagnie Plastic Omnium | Reliance Industries vs. MoneysupermarketCom Group PLC | Reliance Industries vs. Vulcan Materials Co | Reliance Industries vs. Games Workshop Group |
| Centrica PLC vs. Metals Exploration Plc | Centrica PLC vs. McEwen Mining | Centrica PLC vs. Infrastrutture Wireless Italiane | Centrica PLC vs. Batm Advanced Communications |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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