Correlation Between Mughal Iron and Packages

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

Diversification Opportunities for Mughal Iron and Packages

0.14

Correlation Coefficient

Mughal Iron  Packages

Average diversification

The 3 months correlation between Mughal and Packages is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Mughal Iron Steel and Packages in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Packages 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 Packages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Packages has no effect on the direction of Mughal Iron i.e., Mughal Iron and Packages go up and down completely randomly.

Pair Corralation between Mughal Iron and Packages

Assuming the 90 days trading horizon Mughal Iron Steel is expected to under-perform the Packages. But the stock apears to be less risky and, when comparing its historical volatility, Mughal Iron Steel is 1.24 times less risky than Packages. The stock trades about -0.05 of its potential returns per unit of risk. The Packages is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  61,188  in Packages on December 24, 2024 and sell it today you would lose (2,678) from holding Packages or give up 4.38% of portfolio value over 90 days.

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

Mughal Iron Steel  vs.  Packages

Mughal Iron Steel

Risk-Adjusted Performance

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Packages

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Mughal Iron and Packages

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

The idea behind Mughal Iron Steel and Packages 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.