Correlation Between California Software and Mahamaya Steel

Can any of the company-specific risk be diversified away by investing in both California Software and Mahamaya Steel 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 California Software and Mahamaya Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between California Software and Mahamaya Steel Industries, you can compare the effects of market volatilities on California Software and Mahamaya Steel 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 California Software with a short position of Mahamaya Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Software and Mahamaya Steel.

Diversification Opportunities for California Software and Mahamaya Steel

-0.22

Correlation Coefficient

California Software  Mahamaya Steel

Very good diversification

The 3 months correlation between California and Mahamaya is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding California Software and Mahamaya Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mahamaya Steel Industries and California Software 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 California Software are associated (or correlated) with Mahamaya Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mahamaya Steel Industries has no effect on the direction of California Software i.e., California Software and Mahamaya Steel go up and down completely randomly.

Pair Corralation between California Software and Mahamaya Steel

Assuming the 90 days trading horizon California Software is expected to under-perform the Mahamaya Steel. But the stock apears to be less risky and, when comparing its historical volatility, California Software is 1.37 times less risky than Mahamaya Steel. The stock trades about -0.29 of its potential returns per unit of risk. The Mahamaya Steel Industries is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  21,477  in Mahamaya Steel Industries on September 28, 2024 and sell it today you would lose (2,178) from holding Mahamaya Steel Industries or give up 10.14% of portfolio value over 90 days.

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

California Software  vs.  Mahamaya Steel Industries

California Software

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mahamaya Steel Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mahamaya Steel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Mahamaya Steel is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with California Software and Mahamaya Steel

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

The idea behind California Software and Mahamaya Steel 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.