Correlation Between Fine Organic and Prakash Steelage

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

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

Diversification Opportunities for Fine Organic and Prakash Steelage

0.88

Correlation Coefficient

Fine Organic  Prakash Steelage

Very poor diversification

The 3 months correlation between Fine and Prakash is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Fine Organic Industries and Prakash Steelage Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prakash Steelage and Fine Organic 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 Fine Organic Industries 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 Fine Organic i.e., Fine Organic and Prakash Steelage go up and down completely randomly.

Pair Corralation between Fine Organic and Prakash Steelage

Assuming the 90 days trading horizon Fine Organic Industries is expected to generate 0.85 times more return on investment than Prakash Steelage. However, Fine Organic Industries is 1.18 times less risky than Prakash Steelage. It trades about -0.09 of its potential returns per unit of risk. Prakash Steelage Limited is currently generating about -0.11 per unit of risk. If you would invest  458,965  in Fine Organic Industries on December 27, 2024 and sell it today you would lose (57,705) from holding Fine Organic Industries or give up 12.57% of portfolio value over 90 days.

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

Fine Organic Industries  vs.  Prakash Steelage Limited

Fine Organic Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fine Organic Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Prakash Steelage

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Fine Organic and Prakash Steelage

The main advantage of trading using opposite Fine Organic and Prakash Steelage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fine Organic 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 Fine Organic Industries 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.