Correlation Between Sarthak Metals and Rico Auto

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

Diversification Opportunities for Sarthak Metals and Rico Auto

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Sarthak and Rico is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Sarthak Metals Limited and Rico Auto Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rico Auto Industries and Sarthak Metals 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 Sarthak Metals Limited are associated (or correlated) with Rico Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rico Auto Industries has no effect on the direction of Sarthak Metals i.e., Sarthak Metals and Rico Auto go up and down completely randomly.

Pair Corralation between Sarthak Metals and Rico Auto

Assuming the 90 days trading horizon Sarthak Metals Limited is expected to generate 0.77 times more return on investment than Rico Auto. However, Sarthak Metals Limited is 1.29 times less risky than Rico Auto. It trades about -0.19 of its potential returns per unit of risk. Rico Auto Industries is currently generating about -0.22 per unit of risk. If you would invest  15,700  in Sarthak Metals Limited on November 28, 2024 and sell it today you would lose (1,973) from holding Sarthak Metals Limited or give up 12.57% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Sarthak Metals Limited  vs.  Rico Auto Industries

 Performance 
       Timeline  
Sarthak Metals 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Sarthak Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Rico Auto Industries 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Rico Auto Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sarthak Metals and Rico Auto Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sarthak Metals and Rico Auto

The main advantage of trading using opposite Sarthak Metals and Rico Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sarthak Metals position performs unexpectedly, Rico Auto 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 Rico Auto will offset losses from the drop in Rico Auto's long position.
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The idea behind Sarthak Metals Limited and Rico Auto Industries 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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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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