Correlation Between Wipro and Raj Rayon

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

Diversification Opportunities for Wipro and Raj Rayon

-0.15
  Correlation Coefficient

Good diversification

The 3 months correlation between Wipro and Raj is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Wipro Limited and Raj Rayon Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raj Rayon Industries and Wipro 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 Wipro Limited are associated (or correlated) with Raj Rayon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raj Rayon Industries has no effect on the direction of Wipro i.e., Wipro and Raj Rayon go up and down completely randomly.

Pair Corralation between Wipro and Raj Rayon

Assuming the 90 days trading horizon Wipro Limited is expected to generate 1.05 times more return on investment than Raj Rayon. However, Wipro is 1.05 times more volatile than Raj Rayon Industries. It trades about 0.04 of its potential returns per unit of risk. Raj Rayon Industries is currently generating about -0.02 per unit of risk. If you would invest  19,432  in Wipro Limited on January 20, 2025 and sell it today you would earn a total of  4,258  from holding Wipro Limited or generate 21.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.71%
ValuesDaily Returns

Wipro Limited  vs.  Raj Rayon Industries

 Performance 
       Timeline  
Wipro Limited 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Wipro Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
Raj Rayon Industries 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Raj Rayon Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Raj Rayon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Wipro and Raj Rayon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Wipro and Raj Rayon

The main advantage of trading using opposite Wipro and Raj Rayon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wipro position performs unexpectedly, Raj Rayon 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 Raj Rayon will offset losses from the drop in Raj Rayon's long position.
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The idea behind Wipro Limited and Raj Rayon 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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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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