Correlation Between Prakash Steelage and Indian Overseas

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

Diversification Opportunities for Prakash Steelage and Indian Overseas

0.77

Correlation Coefficient

Prakash Steelage  Indian Overseas

Poor diversification

The 3 months correlation between Prakash and Indian is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Prakash Steelage Limited and Indian Overseas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Overseas Bank 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 Indian Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Overseas Bank has no effect on the direction of Prakash Steelage i.e., Prakash Steelage and Indian Overseas go up and down completely randomly.

Pair Corralation between Prakash Steelage and Indian Overseas

Assuming the 90 days trading horizon Prakash Steelage Limited is expected to under-perform the Indian Overseas. But the stock apears to be less risky and, when comparing its historical volatility, Prakash Steelage Limited is 1.18 times less risky than Indian Overseas. The stock trades about -0.03 of its potential returns per unit of risk. The Indian Overseas Bank is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,345  in Indian Overseas Bank on September 25, 2024 and sell it today you would earn a total of  819.00  from holding Indian Overseas Bank or generate 18.85% return on investment over 90 days.

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

Prakash Steelage Limited  vs.  Indian Overseas Bank

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 weak 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.

Indian Overseas Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indian Overseas Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Prakash Steelage and Indian Overseas

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

The idea behind Prakash Steelage Limited and Indian Overseas Bank 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.