Correlation Between Mahamaya Steel and Parag Milk

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

Diversification Opportunities for Mahamaya Steel and Parag Milk

0.64

Correlation Coefficient

Mahamaya Steel  Parag Milk

Poor diversification

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

Pair Corralation between Mahamaya Steel and Parag Milk

Assuming the 90 days trading horizon Mahamaya Steel Industries is expected to generate 1.04 times more return on investment than Parag Milk. However, Mahamaya Steel is 1.04 times more volatile than Parag Milk Foods. It trades about 0.08 of its potential returns per unit of risk. Parag Milk Foods is currently generating about 0.06 per unit of risk. If you would invest  7,085  in Mahamaya Steel Industries on September 19, 2024 and sell it today you would earn a total of  13,054  from holding Mahamaya Steel Industries or generate 184.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Mahamaya Steel Industries  vs.  Parag Milk Foods

Mahamaya Steel Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mahamaya Steel Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Mahamaya Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Parag Milk Foods

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Parag Milk Foods are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, Parag Milk demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mahamaya Steel and Parag Milk

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

The idea behind Mahamaya Steel Industries and Parag Milk Foods 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.