Correlation Between STEEL EXCHANGE and Malu Paper

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

By analyzing existing cross correlation between STEEL EXCHANGE INDIA and Malu Paper Mills, you can compare the effects of market volatilities on STEEL EXCHANGE and Malu Paper 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 STEEL EXCHANGE with a short position of Malu Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of STEEL EXCHANGE and Malu Paper.

Diversification Opportunities for STEEL EXCHANGE and Malu Paper

0.37

Correlation Coefficient

STEEL EXCHANGE  Malu Paper

Weak diversification

The 3 months correlation between STEEL and Malu is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding STEEL EXCHANGE INDIA and Malu Paper Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malu Paper Mills and STEEL EXCHANGE 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 STEEL EXCHANGE INDIA are associated (or correlated) with Malu Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malu Paper Mills has no effect on the direction of STEEL EXCHANGE i.e., STEEL EXCHANGE and Malu Paper go up and down completely randomly.

Pair Corralation between STEEL EXCHANGE and Malu Paper

Assuming the 90 days trading horizon STEEL EXCHANGE INDIA is expected to under-perform the Malu Paper. But the stock apears to be less risky and, when comparing its historical volatility, STEEL EXCHANGE INDIA is 1.49 times less risky than Malu Paper. The stock trades about -0.05 of its potential returns per unit of risk. The Malu Paper Mills is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,676  in Malu Paper Mills on October 7, 2024 and sell it today you would earn a total of  21.00  from holding Malu Paper Mills or generate 0.45% return on investment over 90 days.

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

STEEL EXCHANGE INDIA  vs.  Malu Paper Mills

STEEL EXCHANGE INDIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STEEL EXCHANGE INDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Malu Paper Mills

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Malu Paper Mills are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Malu Paper is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with STEEL EXCHANGE and Malu Paper

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

The idea behind STEEL EXCHANGE INDIA and Malu Paper Mills 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.