Correlation Between 21st Century and Prakash Steelage

Can any of the company-specific risk be diversified away by investing in both 21st Century and Prakash Steelage 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 21st Century and Prakash Steelage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 21st Century Management and Prakash Steelage Limited, you can compare the effects of market volatilities on 21st Century and Prakash Steelage 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 21st Century with a short position of Prakash Steelage. Check out your portfolio center. Please also check ongoing floating volatility patterns of 21st Century and Prakash Steelage.

Diversification Opportunities for 21st Century and Prakash Steelage

0.11

Correlation Coefficient

21st Century  Prakash Steelage

Average diversification

The 3 months correlation between 21st and Prakash is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding 21st Century Management and Prakash Steelage Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prakash Steelage and 21st Century 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 21st Century Management are associated (or correlated) with Prakash Steelage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prakash Steelage has no effect on the direction of 21st Century i.e., 21st Century and Prakash Steelage go up and down completely randomly.

Pair Corralation between 21st Century and Prakash Steelage

Assuming the 90 days trading horizon 21st Century Management is expected to under-perform the Prakash Steelage. But the stock apears to be less risky and, when comparing its historical volatility, 21st Century Management is 1.71 times less risky than Prakash Steelage. The stock trades about -0.37 of its potential returns per unit of risk. The Prakash Steelage Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  797.00  in Prakash Steelage Limited on September 22, 2024 and sell it today you would earn a total of  43.00  from holding Prakash Steelage Limited or generate 5.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

21st Century Management  vs.  Prakash Steelage Limited

21st Century Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 21st Century Management 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 primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Prakash Steelage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prakash Steelage Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Prakash Steelage is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with 21st Century and Prakash Steelage

The main advantage of trading using opposite 21st Century and Prakash Steelage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 21st Century position performs unexpectedly, Prakash Steelage 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 Prakash Steelage will offset losses from the drop in Prakash Steelage's long position.

The idea behind 21st Century Management and Prakash Steelage 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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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.