Correlation Between MRF and IdeaForge Technology

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

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

Diversification Opportunities for MRF and IdeaForge Technology

0.55

Correlation Coefficient

MRF  IdeaForge Technology

Very weak diversification

The 3 months correlation between MRF and IdeaForge is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding MRF Limited and ideaForge Technology Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ideaForge Technology 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 IdeaForge Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ideaForge Technology has no effect on the direction of MRF i.e., MRF and IdeaForge Technology go up and down completely randomly.

Pair Corralation between MRF and IdeaForge Technology

Assuming the 90 days trading horizon MRF is expected to generate 2.18 times less return on investment than IdeaForge Technology. But when comparing it to its historical volatility, MRF Limited is 2.2 times less risky than IdeaForge Technology. It trades about 0.09 of its potential returns per unit of risk. ideaForge Technology Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  59,930  in ideaForge Technology Limited on October 5, 2024 and sell it today you would earn a total of  2,185  from holding ideaForge Technology Limited or generate 3.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

MRF Limited  vs.  ideaForge Technology 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

ideaForge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ideaForge Technology Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, IdeaForge Technology is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with MRF and IdeaForge Technology

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

The idea behind MRF Limited and ideaForge Technology 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.