Correlation Between Metalyst Forgings and Modi Rubber

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

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

Diversification Opportunities for Metalyst Forgings and Modi Rubber

0.0

Correlation Coefficient

Metalyst Forgings  Modi Rubber

Pay attention - limited upside

The 3 months correlation between Metalyst and Modi is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Metalyst Forgings Limited and Modi Rubber Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modi Rubber Limited and Metalyst Forgings 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 Metalyst Forgings Limited are associated (or correlated) with Modi Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modi Rubber Limited has no effect on the direction of Metalyst Forgings i.e., Metalyst Forgings and Modi Rubber go up and down completely randomly.

Pair Corralation between Metalyst Forgings and Modi Rubber

Assuming the 90 days trading horizon Metalyst Forgings is expected to generate 3.15 times less return on investment than Modi Rubber. But when comparing it to its historical volatility, Metalyst Forgings Limited is 1.32 times less risky than Modi Rubber. It trades about 0.03 of its potential returns per unit of risk. Modi Rubber Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8,500  in Modi Rubber Limited on September 24, 2024 and sell it today you would earn a total of  4,230  from holding Modi Rubber Limited or generate 49.76% return on investment over 90 days.

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

Metalyst Forgings Limited  vs.  Modi Rubber Limited

Metalyst Forgings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metalyst Forgings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Metalyst Forgings is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Modi Rubber Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Metalyst Forgings and Modi Rubber

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

The idea behind Metalyst Forgings Limited and Modi Rubber 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.