Correlation Between Prakash Steelage and Mahamaya Steel

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

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

Diversification Opportunities for Prakash Steelage and Mahamaya Steel

-0.57

Correlation Coefficient

Prakash Steelage  Mahamaya Steel

Excellent diversification

The 3 months correlation between Prakash and Mahamaya is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Prakash Steelage Limited 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 Prakash Steelage 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 Prakash Steelage Limited 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 Prakash Steelage i.e., Prakash Steelage and Mahamaya Steel go up and down completely randomly.

Pair Corralation between Prakash Steelage and Mahamaya Steel

Assuming the 90 days trading horizon Prakash Steelage Limited is expected to under-perform the Mahamaya Steel. In addition to that, Prakash Steelage is 1.38 times more volatile than Mahamaya Steel Industries. It trades about -0.04 of its total potential returns per unit of risk. Mahamaya Steel Industries is currently generating about 0.16 per unit of volatility. If you would invest  18,248  in Mahamaya Steel Industries on September 4, 2024 and sell it today you would earn a total of  3,549  from holding Mahamaya Steel Industries or generate 19.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Prakash Steelage Limited  vs.  Mahamaya Steel Industries

Prakash Steelage

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mahamaya Steel Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mahamaya Steel Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Mahamaya Steel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prakash Steelage and Mahamaya Steel

The main advantage of trading using opposite Prakash Steelage and Mahamaya Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prakash Steelage 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 Prakash Steelage Limited 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.