Correlation Between Electrosteel Castings and Cambridge Technology

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

By analyzing existing cross correlation between Electrosteel Castings Limited and Cambridge Technology Enterprises, you can compare the effects of market volatilities on Electrosteel Castings and Cambridge Technology 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 Electrosteel Castings with a short position of Cambridge Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electrosteel Castings and Cambridge Technology.

Diversification Opportunities for Electrosteel Castings and Cambridge Technology

0.92

Correlation Coefficient

Electrosteel Castings  Cambridge Technology

Almost no diversification

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

Pair Corralation between Electrosteel Castings and Cambridge Technology

Assuming the 90 days trading horizon Electrosteel Castings Limited is expected to generate 0.93 times more return on investment than Cambridge Technology. However, Electrosteel Castings Limited is 1.07 times less risky than Cambridge Technology. It trades about -0.13 of its potential returns per unit of risk. Cambridge Technology Enterprises is currently generating about -0.48 per unit of risk. If you would invest  13,550  in Electrosteel Castings Limited on December 28, 2024 and sell it today you would lose (3,479) from holding Electrosteel Castings Limited or give up 25.68% of portfolio value over 90 days.

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

Electrosteel Castings Limited  vs.  Cambridge Technology Enterpris

Electrosteel Castings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Electrosteel Castings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Cambridge Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cambridge Technology Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Electrosteel Castings and Cambridge Technology

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

The idea behind Electrosteel Castings Limited and Cambridge Technology Enterprises 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.