Correlation Between Indian Metals and Mahamaya Steel

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

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

Diversification Opportunities for Indian Metals and Mahamaya Steel

0.34

Correlation Coefficient

Indian Metals  Mahamaya Steel

Weak diversification

The 3 months correlation between Indian and Mahamaya is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro 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 Indian Metals 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 Indian Metals Ferro 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 Indian Metals i.e., Indian Metals and Mahamaya Steel go up and down completely randomly.

Pair Corralation between Indian Metals and Mahamaya Steel

Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 1.36 times more return on investment than Mahamaya Steel. However, Indian Metals is 1.36 times more volatile than Mahamaya Steel Industries. It trades about 0.28 of its potential returns per unit of risk. Mahamaya Steel Industries is currently generating about 0.05 per unit of risk. If you would invest  63,114  in Indian Metals Ferro on September 12, 2024 and sell it today you would earn a total of  33,601  from holding Indian Metals Ferro or generate 53.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Indian Metals Ferro  vs.  Mahamaya Steel Industries

Indian Metals Ferro

Risk-Adjusted Performance

21 of 100

Solid

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

Mahamaya Steel Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mahamaya Steel Industries are ranked lower than 3 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Indian Metals and Mahamaya Steel

The main advantage of trading using opposite Indian Metals and Mahamaya Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Metals 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 Indian Metals Ferro 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.