Correlation Between Garuda Construction and MphasiS

Can any of the company-specific risk be diversified away by investing in both Garuda Construction and MphasiS 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 MphasiS 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 MphasiS Limited, you can compare the effects of market volatilities on Garuda Construction and MphasiS 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 MphasiS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garuda Construction and MphasiS.

Diversification Opportunities for Garuda Construction and MphasiS

0.58

Correlation Coefficient

Garuda Construction  MphasiS

Very weak diversification

The 3 months correlation between Garuda and MphasiS is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Construction Engineerin and MphasiS Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MphasiS Limited 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 MphasiS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MphasiS Limited has no effect on the direction of Garuda Construction i.e., Garuda Construction and MphasiS go up and down completely randomly.

Pair Corralation between Garuda Construction and MphasiS

Assuming the 90 days trading horizon Garuda Construction Engineering is expected to under-perform the MphasiS. In addition to that, Garuda Construction is 2.25 times more volatile than MphasiS Limited. It trades about -0.02 of its total potential returns per unit of risk. MphasiS Limited is currently generating about 0.03 per unit of volatility. If you would invest  309,805  in MphasiS Limited on September 12, 2024 and sell it today you would earn a total of  8,375  from holding MphasiS Limited or generate 2.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	67.21%
Values	Daily Returns

Garuda Construction Engineerin  vs.  MphasiS Limited

Garuda Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garuda Construction Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Garuda Construction is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

MphasiS Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MphasiS Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MphasiS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Garuda Construction and MphasiS

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

The idea behind Garuda Construction Engineering and MphasiS 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.