Correlation Between MRF and Kavveri Telecom

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

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

Diversification Opportunities for MRF and Kavveri Telecom

0.28

Correlation Coefficient

MRF  Kavveri Telecom

Modest diversification

The 3 months correlation between MRF and Kavveri is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding MRF Limited and Kavveri Telecom Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kavveri Telecom Products 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 Kavveri Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kavveri Telecom Products has no effect on the direction of MRF i.e., MRF and Kavveri Telecom go up and down completely randomly.

Pair Corralation between MRF and Kavveri Telecom

Assuming the 90 days trading horizon MRF is expected to generate 19.22 times less return on investment than Kavveri Telecom. In addition to that, MRF is 1.66 times more volatile than Kavveri Telecom Products. It trades about 0.09 of its total potential returns per unit of risk. Kavveri Telecom Products is currently generating about 2.89 per unit of volatility. If you would invest  4,532  in Kavveri Telecom Products on October 5, 2024 and sell it today you would earn a total of  1,930  from holding Kavveri Telecom Products or generate 42.59% return on investment over 90 days.

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

MRF Limited  vs.  Kavveri Telecom Products

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.

Kavveri Telecom Products

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kavveri Telecom Products are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Kavveri Telecom demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MRF and Kavveri Telecom

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

The idea behind MRF Limited and Kavveri Telecom Products 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.