Correlation Between Investment Trust and MRF

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

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

Diversification Opportunities for Investment Trust and MRF

0.94

Correlation Coefficient

Investment Trust  MRF

Almost no diversification

The 3 months correlation between Investment and MRF is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding The Investment Trust and MRF Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRF Limited and Investment Trust 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 The Investment Trust 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 Investment Trust i.e., Investment Trust and MRF go up and down completely randomly.

Pair Corralation between Investment Trust and MRF

Assuming the 90 days trading horizon The Investment Trust is expected to under-perform the MRF. In addition to that, Investment Trust is 2.47 times more volatile than MRF Limited. It trades about -0.23 of its total potential returns per unit of risk. MRF Limited is currently generating about -0.25 per unit of volatility. If you would invest  12,558,200  in MRF Limited on December 3, 2024 and sell it today you would lose (2,041,200) from holding MRF Limited or give up 16.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

The Investment Trust  vs.  MRF Limited

Investment Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Investment Trust 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

MRF Limited

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Investment Trust and MRF

The main advantage of trading using opposite Investment Trust and MRF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment Trust 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 The Investment Trust 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 Stocks Directory module to find actively traded stocks across global markets.