Correlation Between Mazagon Dock and Aarey Drugs

Can any of the company-specific risk be diversified away by investing in both Mazagon Dock and Aarey Drugs 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 Mazagon Dock and Aarey Drugs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mazagon Dock Shipbuilders and Aarey Drugs Pharmaceuticals, you can compare the effects of market volatilities on Mazagon Dock and Aarey Drugs 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 Mazagon Dock with a short position of Aarey Drugs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mazagon Dock and Aarey Drugs.

Diversification Opportunities for Mazagon Dock and Aarey Drugs

-0.21

Correlation Coefficient

Mazagon Dock  Aarey Drugs

Very good diversification

The 3 months correlation between Mazagon and Aarey is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Mazagon Dock Shipbuilders and Aarey Drugs Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarey Drugs Pharmace and Mazagon Dock 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 Mazagon Dock Shipbuilders are associated (or correlated) with Aarey Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarey Drugs Pharmace has no effect on the direction of Mazagon Dock i.e., Mazagon Dock and Aarey Drugs go up and down completely randomly.

Pair Corralation between Mazagon Dock and Aarey Drugs

Assuming the 90 days trading horizon Mazagon Dock Shipbuilders is expected to generate 55.55 times more return on investment than Aarey Drugs. However, Mazagon Dock is 55.55 times more volatile than Aarey Drugs Pharmaceuticals. It trades about 0.11 of its potential returns per unit of risk. Aarey Drugs Pharmaceuticals is currently generating about -0.04 per unit of risk. If you would invest  218,859  in Mazagon Dock Shipbuilders on October 10, 2024 and sell it today you would lose (3,289) from holding Mazagon Dock Shipbuilders or give up 1.5% of portfolio value over 90 days.

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

Mazagon Dock Shipbuilders  vs.  Aarey Drugs Pharmaceuticals

Mazagon Dock Shipbuilders

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mazagon Dock Shipbuilders are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Mazagon Dock disclosed solid returns over the last few months and may actually be approaching a breakup point.

Aarey Drugs Pharmace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aarey Drugs Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Aarey Drugs is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Mazagon Dock and Aarey Drugs

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

The idea behind Mazagon Dock Shipbuilders and Aarey Drugs Pharmaceuticals 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..