Correlation Between Rainbow Childrens and Manaksia Steels

Can any of the company-specific risk be diversified away by investing in both Rainbow Childrens and Manaksia Steels 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 Rainbow Childrens and Manaksia Steels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rainbow Childrens Medicare and Manaksia Steels Limited, you can compare the effects of market volatilities on Rainbow Childrens and Manaksia Steels 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 Rainbow Childrens with a short position of Manaksia Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rainbow Childrens and Manaksia Steels.

Diversification Opportunities for Rainbow Childrens and Manaksia Steels

-0.58

Correlation Coefficient

Rainbow Childrens  Manaksia Steels

Excellent diversification

The 3 months correlation between Rainbow and Manaksia is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Rainbow Childrens Medicare and Manaksia Steels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manaksia Steels and Rainbow Childrens 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 Rainbow Childrens Medicare are associated (or correlated) with Manaksia Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manaksia Steels has no effect on the direction of Rainbow Childrens i.e., Rainbow Childrens and Manaksia Steels go up and down completely randomly.

Pair Corralation between Rainbow Childrens and Manaksia Steels

Assuming the 90 days trading horizon Rainbow Childrens is expected to generate 1.02 times less return on investment than Manaksia Steels. But when comparing it to its historical volatility, Rainbow Childrens Medicare is 1.56 times less risky than Manaksia Steels. It trades about 0.07 of its potential returns per unit of risk. Manaksia Steels Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,515  in Manaksia Steels Limited on September 26, 2024 and sell it today you would earn a total of  2,554  from holding Manaksia Steels Limited or generate 72.66% return on investment over 90 days.

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

Rainbow Childrens Medicare  vs.  Manaksia Steels Limited

Rainbow Childrens

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rainbow Childrens Medicare are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental drivers, Rainbow Childrens may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Manaksia Steels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manaksia Steels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Rainbow Childrens and Manaksia Steels

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

The idea behind Rainbow Childrens Medicare and Manaksia Steels 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..