Correlation Between Mangalore Chemicals and Zomato

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

By analyzing existing cross correlation between Mangalore Chemicals Fertilizers and Zomato Limited, you can compare the effects of market volatilities on Mangalore Chemicals and Zomato 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 Mangalore Chemicals with a short position of Zomato. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mangalore Chemicals and Zomato.

Diversification Opportunities for Mangalore Chemicals and Zomato

0.41

Correlation Coefficient

Mangalore Chemicals  Zomato

Very weak diversification

The 3 months correlation between Mangalore and Zomato is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Mangalore Chemicals Fertilizer and Zomato Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zomato Limited and Mangalore Chemicals 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 Mangalore Chemicals Fertilizers are associated (or correlated) with Zomato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zomato Limited has no effect on the direction of Mangalore Chemicals i.e., Mangalore Chemicals and Zomato go up and down completely randomly.

Pair Corralation between Mangalore Chemicals and Zomato

Assuming the 90 days trading horizon Mangalore Chemicals is expected to generate 2.59 times less return on investment than Zomato. In addition to that, Mangalore Chemicals is 1.22 times more volatile than Zomato Limited. It trades about 0.05 of its total potential returns per unit of risk. Zomato Limited is currently generating about 0.14 per unit of volatility. If you would invest  12,870  in Zomato Limited on September 25, 2024 and sell it today you would earn a total of  14,525  from holding Zomato Limited or generate 112.86% return on investment over 90 days.

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

Mangalore Chemicals Fertilizer  vs.  Zomato Limited

Mangalore Chemicals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mangalore Chemicals Fertilizers are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Mangalore Chemicals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Zomato Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mangalore Chemicals and Zomato

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

The idea behind Mangalore Chemicals Fertilizers and Zomato 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.