Correlation Between Indian Metals and Manaksia Steels

Can any of the company-specific risk be diversified away by investing in both Indian Metals and Manaksia Steels 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 Manaksia Steels 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 Manaksia Steels Limited, you can compare the effects of market volatilities on Indian Metals and Manaksia Steels 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 Manaksia Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Metals and Manaksia Steels.

Diversification Opportunities for Indian Metals and Manaksia Steels

-0.12

Correlation Coefficient

Indian Metals  Manaksia Steels

Good diversification

The 3 months correlation between Indian and Manaksia is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and Manaksia Steels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manaksia Steels 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 Manaksia Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manaksia Steels has no effect on the direction of Indian Metals i.e., Indian Metals and Manaksia Steels go up and down completely randomly.

Pair Corralation between Indian Metals and Manaksia Steels

Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 0.87 times more return on investment than Manaksia Steels. However, Indian Metals Ferro is 1.15 times less risky than Manaksia Steels. It trades about 0.27 of its potential returns per unit of risk. Manaksia Steels Limited is currently generating about 0.08 per unit of risk. If you would invest  62,917  in Indian Metals Ferro on September 13, 2024 and sell it today you would earn a total of  33,153  from holding Indian Metals Ferro or generate 52.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Indian Metals Ferro  vs.  Manaksia Steels Limited

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.

Manaksia Steels

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Manaksia Steels Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Manaksia Steels unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indian Metals and Manaksia Steels

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

The idea behind Indian Metals Ferro and Manaksia Steels 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.