Correlation Between Page Industries and Texmaco Rail

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

By analyzing existing cross correlation between Page Industries Limited and Texmaco Rail Engineering, you can compare the effects of market volatilities on Page Industries and Texmaco Rail 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 Page Industries with a short position of Texmaco Rail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Page Industries and Texmaco Rail.

Diversification Opportunities for Page Industries and Texmaco Rail

-0.34

Correlation Coefficient

Page Industries  Texmaco Rail

Very good diversification

The 3 months correlation between Page and Texmaco is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Page Industries Limited and Texmaco Rail Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texmaco Rail Engineering and Page Industries 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 Page Industries Limited are associated (or correlated) with Texmaco Rail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texmaco Rail Engineering has no effect on the direction of Page Industries i.e., Page Industries and Texmaco Rail go up and down completely randomly.

Pair Corralation between Page Industries and Texmaco Rail

Assuming the 90 days trading horizon Page Industries Limited is expected to generate 0.6 times more return on investment than Texmaco Rail. However, Page Industries Limited is 1.68 times less risky than Texmaco Rail. It trades about 0.12 of its potential returns per unit of risk. Texmaco Rail Engineering is currently generating about -0.01 per unit of risk. If you would invest  4,082,839  in Page Industries Limited on September 5, 2024 and sell it today you would earn a total of  531,486  from holding Page Industries Limited or generate 13.02% return on investment over 90 days.

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

Page Industries Limited  vs.  Texmaco Rail Engineering

Page Industries

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Page Industries Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Page Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Texmaco Rail Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Texmaco Rail Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Texmaco Rail is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Page Industries and Texmaco Rail

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

The idea behind Page Industries Limited and Texmaco Rail Engineering 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.