Correlation Between Electrosteel Castings and Music Broadcast

Can any of the company-specific risk be diversified away by investing in both Electrosteel Castings and Music Broadcast 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 Music Broadcast 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 Music Broadcast Limited, you can compare the effects of market volatilities on Electrosteel Castings and Music Broadcast 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 Music Broadcast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electrosteel Castings and Music Broadcast.

Diversification Opportunities for Electrosteel Castings and Music Broadcast

0.93

Correlation Coefficient

Electrosteel Castings  Music Broadcast

Almost no diversification

The 3 months correlation between Electrosteel and Music is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Electrosteel Castings Limited and Music Broadcast Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Music Broadcast 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 Music Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Music Broadcast has no effect on the direction of Electrosteel Castings i.e., Electrosteel Castings and Music Broadcast go up and down completely randomly.

Pair Corralation between Electrosteel Castings and Music Broadcast

Assuming the 90 days trading horizon Electrosteel Castings Limited is expected to under-perform the Music Broadcast. In addition to that, Electrosteel Castings is 1.57 times more volatile than Music Broadcast Limited. It trades about -0.2 of its total potential returns per unit of risk. Music Broadcast Limited is currently generating about -0.2 per unit of volatility. If you would invest  1,587  in Music Broadcast Limited on September 29, 2024 and sell it today you would lose (359.00) from holding Music Broadcast Limited or give up 22.62% 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.  Music Broadcast Limited

Electrosteel Castings

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Music Broadcast

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Music Broadcast Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Electrosteel Castings and Music Broadcast

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

The idea behind Electrosteel Castings Limited and Music Broadcast 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.