Correlation Between Indraprastha Medical and Modi Rubber

Can any of the company-specific risk be diversified away by investing in both Indraprastha Medical and Modi Rubber 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 Indraprastha Medical and Modi Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Indraprastha Medical and Modi Rubber

0.23

Correlation Coefficient

Indraprastha Medical  Modi Rubber

Modest diversification

The 3 months correlation between Indraprastha and Modi is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Indraprastha Medical and Modi Rubber Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modi Rubber Limited and Indraprastha Medical 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 Indraprastha Medical are associated (or correlated) with Modi Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modi Rubber Limited has no effect on the direction of Indraprastha Medical i.e., Indraprastha Medical and Modi Rubber go up and down completely randomly.

Pair Corralation between Indraprastha Medical and Modi Rubber

Assuming the 90 days trading horizon Indraprastha Medical is expected to generate 1.44 times more return on investment than Modi Rubber. However, Indraprastha Medical is 1.44 times more volatile than Modi Rubber Limited. It trades about 0.15 of its potential returns per unit of risk. Modi Rubber Limited is currently generating about -0.01 per unit of risk. If you would invest  43,720  in Indraprastha Medical on October 10, 2024 and sell it today you would earn a total of  12,860  from holding Indraprastha Medical or generate 29.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Indraprastha Medical  vs.  Modi Rubber Limited

Indraprastha Medical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indraprastha Medical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Indraprastha Medical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Modi Rubber Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modi Rubber Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Modi Rubber is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Indraprastha Medical and Modi Rubber

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

The idea behind Indraprastha Medical and Modi Rubber 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.