Correlation Between Industrial Investment and Prakash Steelage

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

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

Diversification Opportunities for Industrial Investment and Prakash Steelage

-0.39

Correlation Coefficient

Industrial Investment  Prakash Steelage

Very good diversification

The 3 months correlation between Industrial and Prakash is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Investment Trust and Prakash Steelage Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prakash Steelage and Industrial Investment 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 Industrial Investment Trust 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 Industrial Investment i.e., Industrial Investment and Prakash Steelage go up and down completely randomly.

Pair Corralation between Industrial Investment and Prakash Steelage

Assuming the 90 days trading horizon Industrial Investment Trust is expected to generate 0.81 times more return on investment than Prakash Steelage. However, Industrial Investment Trust is 1.23 times less risky than Prakash Steelage. It trades about 0.27 of its potential returns per unit of risk. Prakash Steelage Limited is currently generating about -0.01 per unit of risk. If you would invest  27,150  in Industrial Investment Trust on September 20, 2024 and sell it today you would earn a total of  11,800  from holding Industrial Investment Trust or generate 43.46% return on investment over 90 days.

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

Industrial Investment Trust  vs.  Prakash Steelage Limited

Industrial Investment

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Investment Trust are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Industrial Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Industrial Investment and Prakash Steelage

The main advantage of trading using opposite Industrial Investment and Prakash Steelage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Investment 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 Industrial Investment Trust 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.