Correlation Between MRF and Exxaro Tiles

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

By analyzing existing cross correlation between MRF Limited and Exxaro Tiles Limited, you can compare the effects of market volatilities on MRF and Exxaro Tiles 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 Exxaro Tiles. Check out your portfolio center. Please also check ongoing floating volatility patterns of MRF and Exxaro Tiles.

Diversification Opportunities for MRF and Exxaro Tiles

-0.07

Correlation Coefficient

MRF  Exxaro Tiles

Good diversification

The 3 months correlation between MRF and Exxaro is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding MRF Limited and Exxaro Tiles Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxaro Tiles Limited 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 Exxaro Tiles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxaro Tiles Limited has no effect on the direction of MRF i.e., MRF and Exxaro Tiles go up and down completely randomly.

Pair Corralation between MRF and Exxaro Tiles

Assuming the 90 days trading horizon MRF Limited is expected to generate 0.25 times more return on investment than Exxaro Tiles. However, MRF Limited is 3.99 times less risky than Exxaro Tiles. It trades about -0.25 of its potential returns per unit of risk. Exxaro Tiles Limited is currently generating about -0.22 per unit of risk. If you would invest  13,215,100  in MRF Limited on October 8, 2024 and sell it today you would lose (578,800) from holding MRF Limited or give up 4.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

MRF Limited  vs.  Exxaro Tiles Limited

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 rather sound technical and fundamental indicators, MRF is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Exxaro Tiles Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Exxaro Tiles Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Exxaro Tiles sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MRF and Exxaro Tiles

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

The idea behind MRF Limited and Exxaro Tiles 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.

Check out your portfolio center.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.