Correlation Between Future Retail and Electrosteel Castings

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

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

Diversification Opportunities for Future Retail and Electrosteel Castings

0.0

Correlation Coefficient

Future Retail  Electrosteel Castings

Pay attention - limited upside

The 3 months correlation between Future and Electrosteel is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Future Retail Limited and Electrosteel Castings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electrosteel Castings and Future Retail 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 Future Retail Limited are associated (or correlated) with Electrosteel Castings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electrosteel Castings has no effect on the direction of Future Retail i.e., Future Retail and Electrosteel Castings go up and down completely randomly.

Pair Corralation between Future Retail and Electrosteel Castings

Assuming the 90 days trading horizon Future Retail Limited is expected to under-perform the Electrosteel Castings. But the stock apears to be less risky and, when comparing its historical volatility, Future Retail Limited is 1.52 times less risky than Electrosteel Castings. The stock trades about -0.07 of its potential returns per unit of risk. The Electrosteel Castings Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  11,363  in Electrosteel Castings Limited on September 20, 2024 and sell it today you would earn a total of  3,778  from holding Electrosteel Castings Limited or generate 33.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	88.89%
Values	Daily Returns

Future Retail Limited  vs.  Electrosteel Castings Limited

Future Retail Limited

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Future Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Future Retail is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Electrosteel Castings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electrosteel Castings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Future Retail and Electrosteel Castings

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

The idea behind Future Retail Limited and Electrosteel Castings 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.