Correlation Between Prakash Steelage and Zee Entertainment

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

Diversification Opportunities for Prakash Steelage and Zee Entertainment

0.63

Correlation Coefficient

Prakash Steelage  Zee Entertainment

Poor diversification

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

Pair Corralation between Prakash Steelage and Zee Entertainment

Assuming the 90 days trading horizon Prakash Steelage Limited is expected to generate 1.04 times more return on investment than Zee Entertainment. However, Prakash Steelage is 1.04 times more volatile than Zee Entertainment Enterprises. It trades about 0.05 of its potential returns per unit of risk. Zee Entertainment Enterprises is currently generating about -0.02 per unit of risk. If you would invest  485.00  in Prakash Steelage Limited on October 4, 2024 and sell it today you would earn a total of  316.00  from holding Prakash Steelage Limited or generate 65.15% 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.  Zee Entertainment Enterprises

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.

Zee Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zee Entertainment Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Zee Entertainment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Prakash Steelage and Zee Entertainment

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

The idea behind Prakash Steelage Limited and Zee Entertainment Enterprises 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.