Correlation Between 3M India and Mangalam Drugs

Can any of the company-specific risk be diversified away by investing in both 3M India and Mangalam Drugs 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 3M India and Mangalam Drugs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 3M India Limited and Mangalam Drugs And, you can compare the effects of market volatilities on 3M India and Mangalam Drugs 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 3M India with a short position of Mangalam Drugs. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M India and Mangalam Drugs.

Diversification Opportunities for 3M India and Mangalam Drugs

0.62

Correlation Coefficient

3M India  Mangalam Drugs

Poor diversification

The 3 months correlation between 3MINDIA and Mangalam is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding 3M India Limited and Mangalam Drugs And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mangalam Drugs And and 3M India 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 3M India Limited are associated (or correlated) with Mangalam Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mangalam Drugs And has no effect on the direction of 3M India i.e., 3M India and Mangalam Drugs go up and down completely randomly.

Pair Corralation between 3M India and Mangalam Drugs

Assuming the 90 days trading horizon 3M India Limited is expected to generate 0.81 times more return on investment than Mangalam Drugs. However, 3M India Limited is 1.24 times less risky than Mangalam Drugs. It trades about -0.1 of its potential returns per unit of risk. Mangalam Drugs And is currently generating about -0.17 per unit of risk. If you would invest  3,566,815  in 3M India Limited on August 31, 2024 and sell it today you would lose (362,600) from holding 3M India Limited or give up 10.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

3M India Limited  vs.  Mangalam Drugs And

3M India Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 3M India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Mangalam Drugs And

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mangalam Drugs And has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with 3M India and Mangalam Drugs

The main advantage of trading using opposite 3M India and Mangalam Drugs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M India position performs unexpectedly, Mangalam Drugs 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 Mangalam Drugs will offset losses from the drop in Mangalam Drugs' long position.

The idea behind 3M India Limited and Mangalam Drugs And 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.