Correlation Between Mahamaya Steel and Garuda Construction

Can any of the company-specific risk be diversified away by investing in both Mahamaya Steel and Garuda Construction 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 Mahamaya Steel and Garuda Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mahamaya Steel Industries and Garuda Construction Engineering, you can compare the effects of market volatilities on Mahamaya Steel and Garuda Construction 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 Mahamaya Steel with a short position of Garuda Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mahamaya Steel and Garuda Construction.

Diversification Opportunities for Mahamaya Steel and Garuda Construction

-0.64

Correlation Coefficient

Mahamaya Steel  Garuda Construction

Excellent diversification

The 3 months correlation between Mahamaya and Garuda is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Mahamaya Steel Industries and Garuda Construction Engineerin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garuda Construction and Mahamaya Steel 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 Mahamaya Steel Industries are associated (or correlated) with Garuda Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garuda Construction has no effect on the direction of Mahamaya Steel i.e., Mahamaya Steel and Garuda Construction go up and down completely randomly.

Pair Corralation between Mahamaya Steel and Garuda Construction

Assuming the 90 days trading horizon Mahamaya Steel Industries is expected to under-perform the Garuda Construction. But the stock apears to be less risky and, when comparing its historical volatility, Mahamaya Steel Industries is 2.25 times less risky than Garuda Construction. The stock trades about -0.08 of its potential returns per unit of risk. The Garuda Construction Engineering is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  10,137  in Garuda Construction Engineering on October 20, 2024 and sell it today you would earn a total of  3,083  from holding Garuda Construction Engineering or generate 30.41% return on investment over 90 days.

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

Mahamaya Steel Industries  vs.  Garuda Construction Engineerin

Mahamaya Steel Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mahamaya Steel Industries 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 sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Garuda Construction

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Garuda Construction Engineering are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Garuda Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mahamaya Steel and Garuda Construction

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

The idea behind Mahamaya Steel Industries and Garuda Construction Engineering 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.