Correlation Between Amreli Steels and MCB Investment

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

By analyzing existing cross correlation between Amreli Steels and MCB Investment Manag, you can compare the effects of market volatilities on Amreli Steels and MCB Investment 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 Amreli Steels with a short position of MCB Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amreli Steels and MCB Investment.

Diversification Opportunities for Amreli Steels and MCB Investment

0.92

Correlation Coefficient

Amreli Steels  MCB Investment

Almost no diversification

The 3 months correlation between Amreli and MCB is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Amreli Steels and MCB Investment Manag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Investment Manag and Amreli Steels 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 Amreli Steels are associated (or correlated) with MCB Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCB Investment Manag has no effect on the direction of Amreli Steels i.e., Amreli Steels and MCB Investment go up and down completely randomly.

Pair Corralation between Amreli Steels and MCB Investment

Assuming the 90 days trading horizon Amreli Steels is expected to generate 1.55 times less return on investment than MCB Investment. But when comparing it to its historical volatility, Amreli Steels is 1.14 times less risky than MCB Investment. It trades about 0.23 of its potential returns per unit of risk. MCB Investment Manag is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  3,674  in MCB Investment Manag on October 10, 2024 and sell it today you would earn a total of  3,259  from holding MCB Investment Manag or generate 88.7% return on investment over 90 days.

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

Amreli Steels  vs.  MCB Investment Manag

Amreli Steels

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amreli Steels are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amreli Steels sustained solid returns over the last few months and may actually be approaching a breakup point.

MCB Investment Manag

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MCB Investment Manag are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, MCB Investment disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amreli Steels and MCB Investment

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

The idea behind Amreli Steels and MCB Investment Manag 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 Global Correlations module to find global opportunities by holding instruments from different markets.