Correlation Between MRF and EMBASSY OFFICE

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

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

Diversification Opportunities for MRF and EMBASSY OFFICE

-0.34

Correlation Coefficient

MRF  EMBASSY OFFICE

Very good diversification

The 3 months correlation between MRF and EMBASSY is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding MRF Limited 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 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 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 MRF i.e., MRF and EMBASSY OFFICE go up and down completely randomly.

Pair Corralation between MRF and EMBASSY OFFICE

Assuming the 90 days trading horizon MRF Limited is expected to under-perform the EMBASSY OFFICE. But the stock apears to be less risky and, when comparing its historical volatility, MRF Limited is 1.17 times less risky than EMBASSY OFFICE. The stock trades about -0.11 of its potential returns per unit of risk. The EMBASSY OFFICE PARKS is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  38,546  in EMBASSY OFFICE PARKS on October 9, 2024 and sell it today you would lose (1,590) from holding EMBASSY OFFICE PARKS or give up 4.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

MRF Limited  vs.  EMBASSY OFFICE PARKS

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 unsteady 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.

EMBASSY OFFICE PARKS

Risk-Adjusted Performance

0 of 100

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MRF and EMBASSY OFFICE

The main advantage of trading using opposite MRF and EMBASSY OFFICE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MRF 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 MRF Limited 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..