Correlation Between Network18 Media and MRF

Can any of the company-specific risk be diversified away by investing in both Network18 Media and MRF 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 Network18 Media and MRF into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Network18 Media Investments and MRF Limited, you can compare the effects of market volatilities on Network18 Media and MRF 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 Network18 Media with a short position of MRF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Network18 Media and MRF.

Diversification Opportunities for Network18 Media and MRF

-0.2

Correlation Coefficient

Network18 Media  MRF

Good diversification

The 3 months correlation between Network18 and MRF is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Network18 Media Investments and MRF Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRF Limited and Network18 Media 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 Network18 Media Investments are associated (or correlated) with MRF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRF Limited has no effect on the direction of Network18 Media i.e., Network18 Media and MRF go up and down completely randomly.

Pair Corralation between Network18 Media and MRF

Assuming the 90 days trading horizon Network18 Media is expected to generate 1.16 times less return on investment than MRF. In addition to that, Network18 Media is 2.53 times more volatile than MRF Limited. It trades about 0.02 of its total potential returns per unit of risk. MRF Limited is currently generating about 0.07 per unit of volatility. If you would invest  9,098,720  in MRF Limited on September 26, 2024 and sell it today you would earn a total of  3,935,580  from holding MRF Limited or generate 43.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Network18 Media Investments  vs.  MRF Limited

Network18 Media Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Network18 Media Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

MRF Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MRF Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, MRF is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Network18 Media and MRF

The main advantage of trading using opposite Network18 Media and MRF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Network18 Media position performs unexpectedly, MRF 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 MRF will offset losses from the drop in MRF's long position.

The idea behind Network18 Media Investments and MRF 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.