Correlation Between Prakash Steelage and Aarti Drugs

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

By analyzing existing cross correlation between Prakash Steelage Limited and Aarti Drugs Limited, you can compare the effects of market volatilities on Prakash Steelage and Aarti Drugs 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 Prakash Steelage with a short position of Aarti Drugs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prakash Steelage and Aarti Drugs.

Diversification Opportunities for Prakash Steelage and Aarti Drugs

0.39

Correlation Coefficient

Prakash Steelage  Aarti Drugs

Weak diversification

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

Pair Corralation between Prakash Steelage and Aarti Drugs

Assuming the 90 days trading horizon Prakash Steelage Limited is expected to generate 1.44 times more return on investment than Aarti Drugs. However, Prakash Steelage is 1.44 times more volatile than Aarti Drugs Limited. It trades about 0.05 of its potential returns per unit of risk. Aarti Drugs Limited is currently generating about 0.02 per unit of risk. If you would invest  485.00  in Prakash Steelage Limited on October 10, 2024 and sell it today you would earn a total of  323.00  from holding Prakash Steelage Limited or generate 66.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

Prakash Steelage Limited  vs.  Aarti Drugs Limited

Prakash Steelage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prakash Steelage Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Aarti Drugs Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aarti Drugs Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Prakash Steelage and Aarti Drugs

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

The idea behind Prakash Steelage Limited and Aarti Drugs 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.