Correlation Between Exxaro Tiles and MRF

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

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

Diversification Opportunities for Exxaro Tiles and MRF

-0.07

Correlation Coefficient

Exxaro Tiles  MRF

Good diversification

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

Pair Corralation between Exxaro Tiles and MRF

Assuming the 90 days trading horizon Exxaro Tiles Limited is expected to under-perform the MRF. In addition to that, Exxaro Tiles is 3.99 times more volatile than MRF Limited. It trades about -0.22 of its total potential returns per unit of risk. MRF Limited is currently generating about -0.25 per unit of volatility. If you would invest  13,215,100  in MRF Limited on October 8, 2024 and sell it today you would lose (578,800) from holding MRF Limited or give up 4.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Exxaro Tiles Limited  vs.  MRF Limited

Exxaro Tiles Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Exxaro Tiles Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Exxaro Tiles sustained solid returns over the last few months and may actually be approaching a breakup point.

MRF Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MRF Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, MRF is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Exxaro Tiles and MRF

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

The idea behind Exxaro Tiles Limited and MRF 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.