Correlation Between Mughal Iron and Loads

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

By analyzing existing cross correlation between Mughal Iron Steel and Loads, you can compare the effects of market volatilities on Mughal Iron and Loads 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 Mughal Iron with a short position of Loads. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mughal Iron and Loads.

Diversification Opportunities for Mughal Iron and Loads

-0.39

Correlation Coefficient

Mughal Iron  Loads

Very good diversification

The 3 months correlation between Mughal and Loads is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Mughal Iron Steel and Loads in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loads and Mughal Iron 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 Mughal Iron Steel are associated (or correlated) with Loads. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loads has no effect on the direction of Mughal Iron i.e., Mughal Iron and Loads go up and down completely randomly.

Pair Corralation between Mughal Iron and Loads

Assuming the 90 days trading horizon Mughal Iron Steel is expected to under-perform the Loads. But the stock apears to be less risky and, when comparing its historical volatility, Mughal Iron Steel is 1.14 times less risky than Loads. The stock trades about -0.02 of its potential returns per unit of risk. The Loads is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,028  in Loads on September 14, 2024 and sell it today you would earn a total of  561.00  from holding Loads or generate 54.57% return on investment over 90 days.

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

Mughal Iron Steel  vs.  Loads

Mughal Iron Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mughal Iron Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical indicators, Mughal Iron is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Loads

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Loads are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Loads disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mughal Iron and Loads

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

The idea behind Mughal Iron Steel and Loads 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.