Correlation Between Multi Retail and Polyram Plastic

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

By analyzing existing cross correlation between Multi Retail Group and Polyram Plastic Industries, you can compare the effects of market volatilities on Multi Retail and Polyram Plastic 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 Multi Retail with a short position of Polyram Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi Retail and Polyram Plastic.

Diversification Opportunities for Multi Retail and Polyram Plastic

0.71

Correlation Coefficient

Multi Retail  Polyram Plastic

Poor diversification

The 3 months correlation between Multi and Polyram is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Multi Retail Group and Polyram Plastic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polyram Plastic Indu and Multi Retail 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 Multi Retail Group are associated (or correlated) with Polyram Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polyram Plastic Indu has no effect on the direction of Multi Retail i.e., Multi Retail and Polyram Plastic go up and down completely randomly.

Pair Corralation between Multi Retail and Polyram Plastic

Assuming the 90 days trading horizon Multi Retail Group is expected to generate 2.17 times more return on investment than Polyram Plastic. However, Multi Retail is 2.17 times more volatile than Polyram Plastic Industries. It trades about 0.3 of its potential returns per unit of risk. Polyram Plastic Industries is currently generating about 0.26 per unit of risk. If you would invest  62,970  in Multi Retail Group on September 5, 2024 and sell it today you would earn a total of  41,330  from holding Multi Retail Group or generate 65.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Multi Retail Group  vs.  Polyram Plastic Industries

Multi Retail Group

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Retail Group are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Multi Retail sustained solid returns over the last few months and may actually be approaching a breakup point.

Polyram Plastic Indu

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Polyram Plastic Industries are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Polyram Plastic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Multi Retail and Polyram Plastic

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

The idea behind Multi Retail Group and Polyram Plastic Industries 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.