Correlation Between Indian Metals and Manaksia Steels

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

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

Diversification Opportunities for Indian Metals and Manaksia Steels

0.91

Correlation Coefficient

Indian Metals  Manaksia Steels

Almost no diversification

The 3 months correlation between Indian and Manaksia is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and Manaksia Steels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manaksia Steels and Indian Metals 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 Indian Metals Ferro 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 Indian Metals i.e., Indian Metals and Manaksia Steels go up and down completely randomly.

Pair Corralation between Indian Metals and Manaksia Steels

Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 1.11 times more return on investment than Manaksia Steels. However, Indian Metals is 1.11 times more volatile than Manaksia Steels Limited. It trades about 0.03 of its potential returns per unit of risk. Manaksia Steels Limited is currently generating about -0.03 per unit of risk. If you would invest  56,442  in Indian Metals Ferro on December 2, 2024 and sell it today you would earn a total of  5,688  from holding Indian Metals Ferro or generate 10.08% return on investment over 90 days.

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

Indian Metals Ferro  vs.  Manaksia Steels Limited

Indian Metals Ferro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indian Metals Ferro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Manaksia Steels

Risk-Adjusted Performance

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 inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Indian Metals and Manaksia Steels

The main advantage of trading using opposite Indian Metals and Manaksia Steels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Metals 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 Indian Metals Ferro 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.