Correlation Between Mazagon Dock and Reliance Industries

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

Diversification Opportunities for Mazagon Dock and Reliance Industries

0.48

Correlation Coefficient

Mazagon Dock  Reliance Industries

Very weak diversification

The 3 months correlation between Mazagon and Reliance is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Mazagon Dock Shipbuilders and Reliance Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Industries 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 Reliance Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Industries has no effect on the direction of Mazagon Dock i.e., Mazagon Dock and Reliance Industries go up and down completely randomly.

Pair Corralation between Mazagon Dock and Reliance Industries

Assuming the 90 days trading horizon Mazagon Dock Shipbuilders is expected to generate 2.95 times more return on investment than Reliance Industries. However, Mazagon Dock is 2.95 times more volatile than Reliance Industries Limited. It trades about 0.07 of its potential returns per unit of risk. Reliance Industries Limited is currently generating about 0.06 per unit of risk. If you would invest  231,740  in Mazagon Dock Shipbuilders on December 27, 2024 and sell it today you would earn a total of  32,575  from holding Mazagon Dock Shipbuilders or generate 14.06% return on investment over 90 days.

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

Mazagon Dock Shipbuilders  vs.  Reliance Industries Limited

Mazagon Dock Shipbuilders

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mazagon Dock Shipbuilders are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Mazagon Dock disclosed solid returns over the last few months and may actually be approaching a breakup point.

Reliance Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Industries Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Reliance Industries is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Mazagon Dock and Reliance Industries

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

The idea behind Mazagon Dock Shipbuilders and Reliance Industries 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.