Correlation Between Computer Age and Mahamaya Steel

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

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

Diversification Opportunities for Computer Age and Mahamaya Steel

-0.18

Correlation Coefficient

Computer Age  Mahamaya Steel

Good diversification

The 3 months correlation between Computer and Mahamaya is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Computer Age Management 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 Computer Age 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 Computer Age Management 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 Computer Age i.e., Computer Age and Mahamaya Steel go up and down completely randomly.

Pair Corralation between Computer Age and Mahamaya Steel

Assuming the 90 days trading horizon Computer Age Management is expected to generate 1.13 times more return on investment than Mahamaya Steel. However, Computer Age is 1.13 times more volatile than Mahamaya Steel Industries. It trades about 0.1 of its potential returns per unit of risk. Mahamaya Steel Industries is currently generating about -0.03 per unit of risk. If you would invest  439,539  in Computer Age Management on September 28, 2024 and sell it today you would earn a total of  56,861  from holding Computer Age Management or generate 12.94% return on investment over 90 days.

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

Computer Age Management  vs.  Mahamaya Steel Industries

Computer Age Management

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Computer Age Management are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Computer Age unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 Computer Age and Mahamaya Steel

The main advantage of trading using opposite Computer Age and Mahamaya Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Computer Age 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 Computer Age Management 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.