Correlation Between Ankit Metal and Indian Railway

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

By analyzing existing cross correlation between Ankit Metal Power and Indian Railway Finance, you can compare the effects of market volatilities on Ankit Metal and Indian Railway 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 Ankit Metal with a short position of Indian Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ankit Metal and Indian Railway.

Diversification Opportunities for Ankit Metal and Indian Railway

0.07

Correlation Coefficient

Ankit Metal  Indian Railway

Significant diversification

The 3 months correlation between Ankit and Indian is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ankit Metal Power and Indian Railway Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Railway Finance and Ankit Metal 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 Ankit Metal Power are associated (or correlated) with Indian Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Railway Finance has no effect on the direction of Ankit Metal i.e., Ankit Metal and Indian Railway go up and down completely randomly.

Pair Corralation between Ankit Metal and Indian Railway

Assuming the 90 days trading horizon Ankit Metal Power is expected to generate 1.39 times more return on investment than Indian Railway. However, Ankit Metal is 1.39 times more volatile than Indian Railway Finance. It trades about 0.58 of its potential returns per unit of risk. Indian Railway Finance is currently generating about 0.11 per unit of risk. If you would invest  325.00  in Ankit Metal Power on September 22, 2024 and sell it today you would earn a total of  151.00  from holding Ankit Metal Power or generate 46.46% return on investment over 90 days.

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

Ankit Metal Power  vs.  Indian Railway Finance

Ankit Metal Power

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ankit Metal Power are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Ankit Metal exhibited solid returns over the last few months and may actually be approaching a breakup point.

Indian Railway Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indian Railway Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Indian Railway is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ankit Metal and Indian Railway

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

The idea behind Ankit Metal Power and Indian Railway Finance 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.