Correlation Between Garuda Construction and MRF

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

Diversification Opportunities for Garuda Construction and MRF

0.31

Correlation Coefficient

Garuda Construction  MRF

Weak diversification

The 3 months correlation between Garuda and MRF is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Garuda Construction Engineerin and MRF Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRF 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 MRF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRF Limited has no effect on the direction of Garuda Construction i.e., Garuda Construction and MRF go up and down completely randomly.

Pair Corralation between Garuda Construction and MRF

Assuming the 90 days trading horizon Garuda Construction Engineering is expected to generate 3.65 times more return on investment than MRF. However, Garuda Construction is 3.65 times more volatile than MRF Limited. It trades about 0.02 of its potential returns per unit of risk. MRF Limited is currently generating about -0.2 per unit of risk. If you would invest  11,309  in Garuda Construction Engineering on December 23, 2024 and sell it today you would lose (21.00) from holding Garuda Construction Engineering or give up 0.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Garuda Construction Engineerin  vs.  MRF Limited

Garuda Construction

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Garuda Construction Engineering are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Garuda Construction is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

MRF Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days MRF Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Garuda Construction and MRF

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

The idea behind Garuda Construction Engineering and MRF 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 Transaction History module to view history of all your transactions and understand their impact on performance.