Correlation Between MRF and PB Fintech

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

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

Diversification Opportunities for MRF and PB Fintech

0.56

Correlation Coefficient

MRF  PB Fintech

Very weak diversification

The 3 months correlation between MRF and POLICYBZR is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding MRF Limited and PB Fintech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PB Fintech 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 PB Fintech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PB Fintech Limited has no effect on the direction of MRF i.e., MRF and PB Fintech go up and down completely randomly.

Pair Corralation between MRF and PB Fintech

Assuming the 90 days trading horizon MRF Limited is expected to under-perform the PB Fintech. But the stock apears to be less risky and, when comparing its historical volatility, MRF Limited is 2.03 times less risky than PB Fintech. The stock trades about -0.06 of its potential returns per unit of risk. The PB Fintech Limited is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  166,155  in PB Fintech Limited on October 8, 2024 and sell it today you would earn a total of  55,430  from holding PB Fintech Limited or generate 33.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

MRF Limited  vs.  PB Fintech 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.

PB Fintech Limited

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PB Fintech Limited are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, PB Fintech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MRF and PB Fintech

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

The idea behind MRF Limited and PB Fintech 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.