Correlation Between Prakash Steelage and Ramco Cements

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

Diversification Opportunities for Prakash Steelage and Ramco Cements

-0.04

Correlation Coefficient

Prakash Steelage  Ramco Cements

Good diversification

The 3 months correlation between Prakash and Ramco is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Prakash Steelage Limited and The Ramco Cements in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramco Cements 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 Ramco Cements. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramco Cements has no effect on the direction of Prakash Steelage i.e., Prakash Steelage and Ramco Cements go up and down completely randomly.

Pair Corralation between Prakash Steelage and Ramco Cements

Assuming the 90 days trading horizon Prakash Steelage Limited is expected to under-perform the Ramco Cements. In addition to that, Prakash Steelage is 1.46 times more volatile than The Ramco Cements. It trades about -0.08 of its total potential returns per unit of risk. The Ramco Cements is currently generating about 0.08 per unit of volatility. If you would invest  86,985  in The Ramco Cements on October 12, 2024 and sell it today you would earn a total of  6,480  from holding The Ramco Cements or generate 7.45% return on investment over 90 days.

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

Prakash Steelage Limited  vs.  The Ramco Cements

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 inconsistent 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.

Ramco Cements

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Ramco Cements are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Ramco Cements may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Prakash Steelage and Ramco Cements

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

The idea behind Prakash Steelage Limited and The Ramco Cements 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.