Correlation Between Prakash Steelage and Home First

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

Diversification Opportunities for Prakash Steelage and Home First

0.39

Correlation Coefficient

Prakash Steelage  Home First

Weak diversification

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

Pair Corralation between Prakash Steelage and Home First

Assuming the 90 days trading horizon Prakash Steelage Limited is expected to generate 1.12 times more return on investment than Home First. However, Prakash Steelage is 1.12 times more volatile than Home First Finance. It trades about -0.04 of its potential returns per unit of risk. Home First Finance is currently generating about -0.14 per unit of risk. If you would invest  903.00  in Prakash Steelage Limited on October 8, 2024 and sell it today you would lose (72.00) from holding Prakash Steelage Limited or give up 7.97% of portfolio value over 90 days.

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

Prakash Steelage Limited  vs.  Home First Finance

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 uncertain 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.

Home First Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home First Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Prakash Steelage and Home First

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

The idea behind Prakash Steelage Limited and Home First Finance 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 Anywhere module to track or share privately all of your investments from the convenience of any device.