Correlation Between Prakash Steelage and Touchwood Entertainment

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

Diversification Opportunities for Prakash Steelage and Touchwood Entertainment

0.77

Correlation Coefficient

Prakash Steelage  Touchwood Entertainment

Poor diversification

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

Pair Corralation between Prakash Steelage and Touchwood Entertainment

Assuming the 90 days trading horizon Prakash Steelage Limited is expected to generate 0.91 times more return on investment than Touchwood Entertainment. However, Prakash Steelage Limited is 1.1 times less risky than Touchwood Entertainment. It trades about -0.01 of its potential returns per unit of risk. Touchwood Entertainment Limited is currently generating about -0.04 per unit of risk. If you would invest  897.00  in Prakash Steelage Limited on September 19, 2024 and sell it today you would lose (33.00) from holding Prakash Steelage Limited or give up 3.68% 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.  Touchwood Entertainment Limite

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 fairly strong basic indicators, Prakash Steelage is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Touchwood Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchwood Entertainment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Prakash Steelage and Touchwood Entertainment

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

The idea behind Prakash Steelage Limited and Touchwood Entertainment 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 Stocks Directory module to find actively traded stocks across global markets.