Correlation Between FCS Software and MRF

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

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

Diversification Opportunities for FCS Software and MRF

0.43

Correlation Coefficient

FCS Software  MRF

Very weak diversification

The 3 months correlation between FCS and MRF is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding FCS Software Solutions and MRF Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRF Limited and FCS Software 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 FCS Software Solutions 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 FCS Software i.e., FCS Software and MRF go up and down completely randomly.

Pair Corralation between FCS Software and MRF

Assuming the 90 days trading horizon FCS Software Solutions is expected to generate 2.69 times more return on investment than MRF. However, FCS Software is 2.69 times more volatile than MRF Limited. It trades about 0.02 of its potential returns per unit of risk. MRF Limited is currently generating about -0.08 per unit of risk. If you would invest  338.00  in FCS Software Solutions on September 26, 2024 and sell it today you would earn a total of  1.00  from holding FCS Software Solutions or generate 0.3% return on investment over 90 days.

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

FCS Software Solutions  vs.  MRF Limited

FCS Software Solutions

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FCS Software Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, FCS Software is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FCS Software and MRF

The main advantage of trading using opposite FCS Software and MRF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FCS Software 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 FCS Software Solutions 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.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.