Correlation Between Prakash Steelage and Saksoft

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

Diversification Opportunities for Prakash Steelage and Saksoft

0.63

Correlation Coefficient

Prakash Steelage  Saksoft

Poor diversification

The 3 months correlation between Prakash and Saksoft is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Prakash Steelage Limited and Saksoft Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saksoft 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 Saksoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saksoft Limited has no effect on the direction of Prakash Steelage i.e., Prakash Steelage and Saksoft go up and down completely randomly.

Pair Corralation between Prakash Steelage and Saksoft

Assuming the 90 days trading horizon Prakash Steelage Limited is expected to generate 0.97 times more return on investment than Saksoft. However, Prakash Steelage Limited is 1.03 times less risky than Saksoft. It trades about -0.13 of its potential returns per unit of risk. Saksoft Limited is currently generating about -0.2 per unit of risk. If you would invest  808.00  in Prakash Steelage Limited on December 27, 2024 and sell it today you would lose (164.00) from holding Prakash Steelage Limited or give up 20.3% of portfolio value over 90 days.

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

Prakash Steelage Limited  vs.  Saksoft Limited

Prakash Steelage

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Saksoft Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Saksoft Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Prakash Steelage and Saksoft

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

The idea behind Prakash Steelage Limited and Saksoft 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.

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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.