Correlation Between MRF and Shyam Telecom

Can any of the company-specific risk be diversified away by investing in both MRF and Shyam 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 Shyam 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 Shyam Telecom Limited, you can compare the effects of market volatilities on MRF and Shyam 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 Shyam Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of MRF and Shyam Telecom.

Diversification Opportunities for MRF and Shyam Telecom

-0.5

Correlation Coefficient

MRF  Shyam Telecom

Very good diversification

The 3 months correlation between MRF and Shyam is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding MRF Limited and Shyam Telecom Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shyam Telecom 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 Shyam Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shyam Telecom Limited has no effect on the direction of MRF i.e., MRF and Shyam Telecom go up and down completely randomly.

Pair Corralation between MRF and Shyam Telecom

Assuming the 90 days trading horizon MRF is expected to generate 2.3 times less return on investment than Shyam Telecom. But when comparing it to its historical volatility, MRF Limited is 2.81 times less risky than Shyam Telecom. It trades about 0.07 of its potential returns per unit of risk. Shyam Telecom Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,090  in Shyam Telecom Limited on October 4, 2024 and sell it today you would earn a total of  984.00  from holding Shyam Telecom Limited or generate 90.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.39%
Values	Daily Returns

MRF Limited  vs.  Shyam Telecom 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.

Shyam Telecom Limited

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shyam Telecom Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Shyam Telecom exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MRF and Shyam Telecom

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

The idea behind MRF Limited and Shyam Telecom 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.