Correlation Between FCS Software and Prakash Steelage

Can any of the company-specific risk be diversified away by investing in both FCS Software 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 FCS Software and Prakash Steelage 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 Prakash Steelage Limited, you can compare the effects of market volatilities on FCS Software 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 FCS Software with a short position of Prakash Steelage. Check out your portfolio center. Please also check ongoing floating volatility patterns of FCS Software and Prakash Steelage.

Diversification Opportunities for FCS Software and Prakash Steelage

0.64

Correlation Coefficient

FCS Software  Prakash Steelage

Poor diversification

The 3 months correlation between FCS and Prakash is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding FCS Software Solutions and Prakash Steelage Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prakash Steelage 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 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 FCS Software i.e., FCS Software and Prakash Steelage go up and down completely randomly.

Pair Corralation between FCS Software and Prakash Steelage

Assuming the 90 days trading horizon FCS Software Solutions is expected to under-perform the Prakash Steelage. But the stock apears to be less risky and, when comparing its historical volatility, FCS Software Solutions is 1.53 times less risky than Prakash Steelage. The stock trades about -0.1 of its potential returns per unit of risk. The Prakash Steelage Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  797.00  in Prakash Steelage Limited on September 22, 2024 and sell it today you would earn a total of  43.00  from holding Prakash Steelage Limited or generate 5.4% return on investment over 90 days.

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

FCS Software Solutions  vs.  Prakash Steelage Limited

FCS Software Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FCS Software Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

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 fairly strong basic indicators, Prakash Steelage is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with FCS Software and Prakash Steelage

The main advantage of trading using opposite FCS Software and Prakash Steelage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FCS Software 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 FCS Software Solutions 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.