Correlation Between Rail Vikas and MRF

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

By analyzing existing cross correlation between Rail Vikas Nigam and MRF Limited, you can compare the effects of market volatilities on Rail Vikas and MRF 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 Rail Vikas with a short position of MRF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rail Vikas and MRF.

Diversification Opportunities for Rail Vikas and MRF

0.83

Correlation Coefficient

Rail Vikas  MRF

Very poor diversification

The 3 months correlation between Rail and MRF is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Rail Vikas Nigam and MRF Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRF Limited and Rail Vikas 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 Rail Vikas Nigam are associated (or correlated) with MRF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRF Limited has no effect on the direction of Rail Vikas i.e., Rail Vikas and MRF go up and down completely randomly.

Pair Corralation between Rail Vikas and MRF

Assuming the 90 days trading horizon Rail Vikas Nigam is expected to generate 2.99 times more return on investment than MRF. However, Rail Vikas is 2.99 times more volatile than MRF Limited. It trades about 0.12 of its potential returns per unit of risk. MRF Limited is currently generating about 0.07 per unit of risk. If you would invest  6,653  in Rail Vikas Nigam on September 23, 2024 and sell it today you would earn a total of  36,672  from holding Rail Vikas Nigam or generate 551.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Rail Vikas Nigam  vs.  MRF Limited

Rail Vikas Nigam

Risk-Adjusted Performance

0 of 100

Very Weak

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

MRF Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MRF 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 sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Rail Vikas and MRF

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

The idea behind Rail Vikas Nigam and MRF 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.