Correlation Between Mazagon Dock and Embassy Office

Can any of the company-specific risk be diversified away by investing in both Mazagon Dock and Embassy Office 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 Embassy Office 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 Embassy Office Parks, you can compare the effects of market volatilities on Mazagon Dock and Embassy Office 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 Embassy Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mazagon Dock and Embassy Office.

Diversification Opportunities for Mazagon Dock and Embassy Office

0.05

Correlation Coefficient

Mazagon Dock  Embassy Office

Significant diversification

The 3 months correlation between Mazagon and Embassy is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Mazagon Dock Shipbuilders and Embassy Office Parks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embassy Office Parks 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 Embassy Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embassy Office Parks has no effect on the direction of Mazagon Dock i.e., Mazagon Dock and Embassy Office go up and down completely randomly.

Pair Corralation between Mazagon Dock and Embassy Office

Assuming the 90 days trading horizon Mazagon Dock Shipbuilders is expected to generate 3.29 times more return on investment than Embassy Office. However, Mazagon Dock is 3.29 times more volatile than Embassy Office Parks. It trades about 0.09 of its potential returns per unit of risk. Embassy Office Parks is currently generating about 0.01 per unit of risk. If you would invest  226,905  in Mazagon Dock Shipbuilders on December 28, 2024 and sell it today you would earn a total of  42,630  from holding Mazagon Dock Shipbuilders or generate 18.79% return on investment over 90 days.

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

Mazagon Dock Shipbuilders  vs.  Embassy Office Parks

Mazagon Dock Shipbuilders

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mazagon Dock Shipbuilders are ranked lower than 7 (%) 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.

Embassy Office Parks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Embassy Office Parks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Embassy Office is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mazagon Dock and Embassy Office

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

The idea behind Mazagon Dock Shipbuilders and Embassy Office Parks 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.