Correlation Between Shyam Metalics and Manali Petrochemicals

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

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

Diversification Opportunities for Shyam Metalics and Manali Petrochemicals

-0.07

Correlation Coefficient

Shyam Metalics  Manali Petrochemicals

Good diversification

The 3 months correlation between Shyam and Manali is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Shyam Metalics and and Manali Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manali Petrochemicals and Shyam Metalics 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 Shyam Metalics and are associated (or correlated) with Manali Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manali Petrochemicals has no effect on the direction of Shyam Metalics i.e., Shyam Metalics and Manali Petrochemicals go up and down completely randomly.

Pair Corralation between Shyam Metalics and Manali Petrochemicals

Assuming the 90 days trading horizon Shyam Metalics and is expected to generate 1.13 times more return on investment than Manali Petrochemicals. However, Shyam Metalics is 1.13 times more volatile than Manali Petrochemicals Limited. It trades about 0.13 of its potential returns per unit of risk. Manali Petrochemicals Limited is currently generating about -0.05 per unit of risk. If you would invest  71,519  in Shyam Metalics and on December 28, 2024 and sell it today you would earn a total of  13,876  from holding Shyam Metalics and or generate 19.4% return on investment over 90 days.

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

Shyam Metalics and  vs.  Manali Petrochemicals Limited

Shyam Metalics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shyam Metalics and are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Shyam Metalics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Manali Petrochemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Manali Petrochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Shyam Metalics and Manali Petrochemicals

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

The idea behind Shyam Metalics and and Manali Petrochemicals 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.