Correlation Between Golden Tobacco and Manaksia Steels

Can any of the company-specific risk be diversified away by investing in both Golden Tobacco and Manaksia Steels 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 Golden Tobacco and Manaksia Steels into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Golden Tobacco and Manaksia Steels

0.21

Correlation Coefficient

Golden Tobacco  Manaksia Steels

Modest diversification

The 3 months correlation between Golden and Manaksia is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Golden Tobacco Limited and Manaksia Steels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manaksia Steels and Golden Tobacco 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 Golden Tobacco Limited are associated (or correlated) with Manaksia Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manaksia Steels has no effect on the direction of Golden Tobacco i.e., Golden Tobacco and Manaksia Steels go up and down completely randomly.

Pair Corralation between Golden Tobacco and Manaksia Steels

Assuming the 90 days trading horizon Golden Tobacco Limited is expected to under-perform the Manaksia Steels. But the stock apears to be less risky and, when comparing its historical volatility, Golden Tobacco Limited is 1.15 times less risky than Manaksia Steels. The stock trades about -0.02 of its potential returns per unit of risk. The Manaksia Steels Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,400  in Manaksia Steels Limited on October 3, 2024 and sell it today you would earn a total of  541.00  from holding Manaksia Steels Limited or generate 10.02% return on investment over 90 days.

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

Golden Tobacco Limited  vs.  Manaksia Steels Limited

Golden Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Tobacco Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Golden Tobacco is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Manaksia Steels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manaksia Steels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Golden Tobacco and Manaksia Steels

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

The idea behind Golden Tobacco Limited and Manaksia Steels 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.