Correlation Between Taj GVK and MRF

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

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

Diversification Opportunities for Taj GVK and MRF

0.18

Correlation Coefficient

Taj GVK  MRF

Average diversification

The 3 months correlation between Taj and MRF is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Taj GVK Hotels and MRF Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRF Limited and Taj GVK 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 Taj GVK Hotels 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 Taj GVK i.e., Taj GVK and MRF go up and down completely randomly.

Pair Corralation between Taj GVK and MRF

Assuming the 90 days trading horizon Taj GVK Hotels is expected to generate 2.8 times more return on investment than MRF. However, Taj GVK is 2.8 times more volatile than MRF Limited. It trades about 0.13 of its potential returns per unit of risk. MRF Limited is currently generating about -0.07 per unit of risk. If you would invest  31,045  in Taj GVK Hotels on September 30, 2024 and sell it today you would earn a total of  7,395  from holding Taj GVK Hotels or generate 23.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Taj GVK Hotels  vs.  MRF Limited

Taj GVK Hotels

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taj GVK Hotels are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Taj GVK sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Taj GVK and MRF

The main advantage of trading using opposite Taj GVK and MRF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taj GVK 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 Taj GVK Hotels 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.