Correlation Between Gujarat Alkalies and Mahamaya Steel

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

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

Diversification Opportunities for Gujarat Alkalies and Mahamaya Steel

0.01

Correlation Coefficient

Gujarat Alkalies  Mahamaya Steel

Significant diversification

The 3 months correlation between Gujarat and Mahamaya is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Alkalies and 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 Gujarat Alkalies 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 Gujarat Alkalies and 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 Gujarat Alkalies i.e., Gujarat Alkalies and Mahamaya Steel go up and down completely randomly.

Pair Corralation between Gujarat Alkalies and Mahamaya Steel

Assuming the 90 days trading horizon Gujarat Alkalies is expected to generate 8.04 times less return on investment than Mahamaya Steel. But when comparing it to its historical volatility, Gujarat Alkalies and is 1.48 times less risky than Mahamaya Steel. It trades about 0.02 of its potential returns per unit of risk. Mahamaya Steel Industries is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,095  in Mahamaya Steel Industries on September 20, 2024 and sell it today you would earn a total of  13,044  from holding Mahamaya Steel Industries or generate 183.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.18%
Values	Daily Returns

Gujarat Alkalies and  vs.  Mahamaya Steel Industries

Gujarat Alkalies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gujarat Alkalies and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Gujarat Alkalies is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Mahamaya Steel Industries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mahamaya Steel Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Mahamaya Steel is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gujarat Alkalies and Mahamaya Steel

The main advantage of trading using opposite Gujarat Alkalies and Mahamaya Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gujarat Alkalies 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 Gujarat Alkalies and 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.