Correlation Between MRF and Can Fin

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

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

Diversification Opportunities for MRF and Can Fin

0.61

Correlation Coefficient

MRF  Can Fin

Poor diversification

The 3 months correlation between MRF and Can is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding MRF Limited and Can Fin Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Can Fin Homes and MRF 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 MRF Limited are associated (or correlated) with Can Fin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Can Fin Homes has no effect on the direction of MRF i.e., MRF and Can Fin go up and down completely randomly.

Pair Corralation between MRF and Can Fin

Assuming the 90 days trading horizon MRF Limited is expected to under-perform the Can Fin. But the stock apears to be less risky and, when comparing its historical volatility, MRF Limited is 1.74 times less risky than Can Fin. The stock trades about -0.12 of its potential returns per unit of risk. The Can Fin Homes is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  88,030  in Can Fin Homes on August 31, 2024 and sell it today you would lose (5,845) from holding Can Fin Homes or give up 6.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

MRF Limited  vs.  Can Fin Homes

MRF Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MRF Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Can Fin Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Can Fin Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Can Fin is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with MRF and Can Fin

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

The idea behind MRF Limited and Can Fin Homes 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.