Correlation Between Manaksia Steels and Touchwood Entertainment

Can any of the company-specific risk be diversified away by investing in both Manaksia Steels and Touchwood Entertainment 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 Manaksia Steels and Touchwood Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Manaksia Steels and Touchwood Entertainment

0.36

Correlation Coefficient

Manaksia Steels  Touchwood Entertainment

Weak diversification

The 3 months correlation between Manaksia and Touchwood is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Manaksia Steels Limited and Touchwood Entertainment Limite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchwood Entertainment and Manaksia Steels 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 Manaksia Steels Limited are associated (or correlated) with Touchwood Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchwood Entertainment has no effect on the direction of Manaksia Steels i.e., Manaksia Steels and Touchwood Entertainment go up and down completely randomly.

Pair Corralation between Manaksia Steels and Touchwood Entertainment

Assuming the 90 days trading horizon Manaksia Steels Limited is expected to generate 1.08 times more return on investment than Touchwood Entertainment. However, Manaksia Steels is 1.08 times more volatile than Touchwood Entertainment Limited. It trades about 0.05 of its potential returns per unit of risk. Touchwood Entertainment Limited is currently generating about 0.03 per unit of risk. If you would invest  3,625  in Manaksia Steels Limited on September 4, 2024 and sell it today you would earn a total of  2,544  from holding Manaksia Steels Limited or generate 70.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

Manaksia Steels Limited  vs.  Touchwood Entertainment Limite

Manaksia Steels

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Manaksia Steels Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Manaksia Steels unveiled solid returns over the last few months and may actually be approaching a breakup point.

Touchwood Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchwood Entertainment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Manaksia Steels and Touchwood Entertainment

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

The idea behind Manaksia Steels Limited and Touchwood Entertainment 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.