Correlation Between Elin Electronics and Prakash Steelage

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

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

Diversification Opportunities for Elin Electronics and Prakash Steelage

0.82

Correlation Coefficient

Elin Electronics  Prakash Steelage

Very poor diversification

The 3 months correlation between Elin and Prakash is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Elin Electronics Limited and Prakash Steelage Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prakash Steelage and Elin Electronics 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 Elin Electronics Limited are associated (or correlated) with Prakash Steelage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prakash Steelage has no effect on the direction of Elin Electronics i.e., Elin Electronics and Prakash Steelage go up and down completely randomly.

Pair Corralation between Elin Electronics and Prakash Steelage

Assuming the 90 days trading horizon Elin Electronics is expected to generate 4.9 times less return on investment than Prakash Steelage. But when comparing it to its historical volatility, Elin Electronics Limited is 1.18 times less risky than Prakash Steelage. It trades about 0.01 of its potential returns per unit of risk. Prakash Steelage Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  485.00  in Prakash Steelage Limited on October 4, 2024 and sell it today you would earn a total of  316.00  from holding Prakash Steelage Limited or generate 65.15% return on investment over 90 days.

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

Elin Electronics Limited  vs.  Prakash Steelage Limited

Elin Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Prakash Steelage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prakash Steelage Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Elin Electronics and Prakash Steelage

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

The idea behind Elin Electronics Limited and Prakash Steelage 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.