Correlation Between Radiant Cash and MRF

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

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

Diversification Opportunities for Radiant Cash and MRF

0.79

Correlation Coefficient

Radiant Cash  MRF

Poor diversification

The 3 months correlation between Radiant and MRF is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Radiant Cash Management and MRF Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRF Limited and Radiant Cash 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 Radiant Cash Management 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 Radiant Cash i.e., Radiant Cash and MRF go up and down completely randomly.

Pair Corralation between Radiant Cash and MRF

Assuming the 90 days trading horizon Radiant Cash Management is expected to under-perform the MRF. In addition to that, Radiant Cash is 1.41 times more volatile than MRF Limited. It trades about -0.05 of its total potential returns per unit of risk. MRF Limited is currently generating about -0.05 per unit of volatility. If you would invest  13,735,100  in MRF Limited on September 13, 2024 and sell it today you would lose (483,400) from holding MRF Limited or give up 3.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Radiant Cash Management  vs.  MRF Limited

Radiant Cash Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Radiant Cash Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Radiant Cash is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Radiant Cash and MRF

The main advantage of trading using opposite Radiant Cash and MRF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Radiant Cash 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 Radiant Cash Management 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.