Correlation Between Fiberweb and Mahamaya Steel

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

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

Diversification Opportunities for Fiberweb and Mahamaya Steel

-0.44

Correlation Coefficient

Fiberweb  Mahamaya Steel

Very good diversification

The 3 months correlation between Fiberweb and Mahamaya is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Fiberweb Limited and Mahamaya Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mahamaya Steel Industries and Fiberweb 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 Fiberweb Limited are associated (or correlated) with Mahamaya Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mahamaya Steel Industries has no effect on the direction of Fiberweb i.e., Fiberweb and Mahamaya Steel go up and down completely randomly.

Pair Corralation between Fiberweb and Mahamaya Steel

Assuming the 90 days trading horizon Fiberweb Limited is expected to generate 1.69 times more return on investment than Mahamaya Steel. However, Fiberweb is 1.69 times more volatile than Mahamaya Steel Industries. It trades about 0.17 of its potential returns per unit of risk. Mahamaya Steel Industries is currently generating about 0.04 per unit of risk. If you would invest  4,290  in Fiberweb Limited on October 7, 2024 and sell it today you would earn a total of  1,821  from holding Fiberweb Limited or generate 42.45% return on investment over 90 days.

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

Fiberweb Limited  vs.  Mahamaya Steel Industries

Fiberweb Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fiberweb Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Fiberweb exhibited solid returns over the last few months and may actually be approaching a breakup point.

Mahamaya Steel Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mahamaya Steel Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Mahamaya Steel is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fiberweb and Mahamaya Steel

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

The idea behind Fiberweb Limited and Mahamaya Steel Industries 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 Global Correlations module to find global opportunities by holding instruments from different markets.