Correlation Between Indian Metals and Transport

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

Diversification Opportunities for Indian Metals and Transport

0.1

Correlation Coefficient

Indian Metals  Transport

Average diversification

The 3 months correlation between Indian and Transport is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and Transport of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transport 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 Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transport has no effect on the direction of Indian Metals i.e., Indian Metals and Transport go up and down completely randomly.

Pair Corralation between Indian Metals and Transport

Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 1.04 times more return on investment than Transport. However, Indian Metals is 1.04 times more volatile than Transport of. It trades about 0.22 of its potential returns per unit of risk. Transport of is currently generating about 0.0 per unit of risk. If you would invest  63,785  in Indian Metals Ferro on September 4, 2024 and sell it today you would earn a total of  23,325  from holding Indian Metals Ferro or generate 36.57% return on investment over 90 days.

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

Indian Metals Ferro  vs.  Transport of

Indian Metals Ferro

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Transport

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Transport is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Indian Metals and Transport

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

The idea behind Indian Metals Ferro and Transport of 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.