Correlation Between Mangalore Chemicals and Power Finance

Can any of the company-specific risk be diversified away by investing in both Mangalore Chemicals and Power Finance 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 Mangalore Chemicals and Power Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Mangalore Chemicals and Power Finance

0.57

Correlation Coefficient

Mangalore Chemicals  Power Finance

Very weak diversification

The 3 months correlation between Mangalore and Power is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Mangalore Chemicals Fertilizer and Power Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Finance and Mangalore Chemicals 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 Mangalore Chemicals Fertilizers are associated (or correlated) with Power Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Finance has no effect on the direction of Mangalore Chemicals i.e., Mangalore Chemicals and Power Finance go up and down completely randomly.

Pair Corralation between Mangalore Chemicals and Power Finance

Assuming the 90 days trading horizon Mangalore Chemicals is expected to generate 1.58 times less return on investment than Power Finance. But when comparing it to its historical volatility, Mangalore Chemicals Fertilizers is 1.12 times less risky than Power Finance. It trades about 0.06 of its potential returns per unit of risk. Power Finance is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  23,918  in Power Finance on September 26, 2024 and sell it today you would earn a total of  21,202  from holding Power Finance or generate 88.64% return on investment over 90 days.

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

Mangalore Chemicals Fertilizer  vs.  Power Finance

Mangalore Chemicals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mangalore Chemicals Fertilizers are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Mangalore Chemicals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Power Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Power Finance is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Mangalore Chemicals and Power Finance

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

The idea behind Mangalore Chemicals Fertilizers and Power Finance 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.