Correlation Between Garuda Construction and Mahamaya Steel

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Can any of the company-specific risk be diversified away by investing in both Garuda Construction 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 Garuda Construction and Mahamaya Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Garuda Construction Engineering and Mahamaya Steel Industries, you can compare the effects of market volatilities on Garuda Construction 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 Garuda Construction with a short position of Mahamaya Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garuda Construction and Mahamaya Steel.

Diversification Opportunities for Garuda Construction and Mahamaya Steel

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Garuda and Mahamaya is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Construction Engineerin 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 Garuda Construction 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 Garuda Construction Engineering 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 Garuda Construction i.e., Garuda Construction and Mahamaya Steel go up and down completely randomly.

Pair Corralation between Garuda Construction and Mahamaya Steel

Assuming the 90 days trading horizon Garuda Construction Engineering is expected to generate 1.5 times more return on investment than Mahamaya Steel. However, Garuda Construction is 1.5 times more volatile than Mahamaya Steel Industries. It trades about 0.1 of its potential returns per unit of risk. Mahamaya Steel Industries is currently generating about 0.09 per unit of risk. If you would invest  10,636  in Garuda Construction Engineering on October 5, 2024 and sell it today you would earn a total of  2,500  from holding Garuda Construction Engineering or generate 23.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy11.29%
ValuesDaily Returns

Garuda Construction Engineerin  vs.  Mahamaya Steel Industries

 Performance 
       Timeline  
Garuda Construction 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Garuda Construction Engineering are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Garuda Construction sustained solid returns over the last few months and may actually be approaching a breakup point.
Mahamaya Steel Industries 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Mahamaya Steel Industries are ranked lower than 1 (%) 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.

Garuda Construction and Mahamaya Steel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Garuda Construction and Mahamaya Steel

The main advantage of trading using opposite Garuda Construction and Mahamaya Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garuda Construction 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 Garuda Construction Engineering 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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