Correlation Between Indian Railway and Ankit Metal

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

By analyzing existing cross correlation between Indian Railway Finance and Ankit Metal Power, you can compare the effects of market volatilities on Indian Railway and Ankit Metal 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 Railway with a short position of Ankit Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Railway and Ankit Metal.

Diversification Opportunities for Indian Railway and Ankit Metal

0.07

Correlation Coefficient

Indian Railway  Ankit Metal

Significant diversification

The 3 months correlation between Indian and Ankit is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Indian Railway Finance and Ankit Metal Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ankit Metal Power and Indian Railway 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 Railway Finance are associated (or correlated) with Ankit Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ankit Metal Power has no effect on the direction of Indian Railway i.e., Indian Railway and Ankit Metal go up and down completely randomly.

Pair Corralation between Indian Railway and Ankit Metal

Assuming the 90 days trading horizon Indian Railway is expected to generate 7.64 times less return on investment than Ankit Metal. But when comparing it to its historical volatility, Indian Railway Finance is 1.39 times less risky than Ankit Metal. It trades about 0.11 of its potential returns per unit of risk. Ankit Metal Power is currently generating about 0.58 of returns per unit of risk over similar time horizon. If you would invest  325.00  in Ankit Metal Power on September 22, 2024 and sell it today you would earn a total of  151.00  from holding Ankit Metal Power or generate 46.46% return on investment over 90 days.

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

Indian Railway Finance  vs.  Ankit Metal Power

Indian Railway Finance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ankit Metal Power

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ankit Metal Power are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Ankit Metal exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indian Railway and Ankit Metal

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

The idea behind Indian Railway Finance and Ankit Metal Power 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.