Correlation Between MRF and Shyam Metalics

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

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

Diversification Opportunities for MRF and Shyam Metalics

0.32

Correlation Coefficient

MRF  Shyam Metalics

Weak diversification

The 3 months correlation between MRF and Shyam is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding MRF Limited and Shyam Metalics and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shyam Metalics 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 Shyam Metalics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shyam Metalics has no effect on the direction of MRF i.e., MRF and Shyam Metalics go up and down completely randomly.

Pair Corralation between MRF and Shyam Metalics

Assuming the 90 days trading horizon MRF Limited is expected to generate 0.53 times more return on investment than Shyam Metalics. However, MRF Limited is 1.9 times less risky than Shyam Metalics. It trades about 0.19 of its potential returns per unit of risk. Shyam Metalics and is currently generating about -0.32 per unit of risk. If you would invest  12,558,500  in MRF Limited on October 4, 2024 and sell it today you would earn a total of  505,000  from holding MRF Limited or generate 4.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

MRF Limited  vs.  Shyam Metalics and

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Shyam Metalics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shyam Metalics and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with MRF and Shyam Metalics

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

The idea behind MRF Limited and Shyam Metalics and 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.