Correlation Between Total Transport and MRF

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

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

Diversification Opportunities for Total Transport and MRF

0.36

Correlation Coefficient

Total Transport  MRF

Weak diversification

The 3 months correlation between Total and MRF is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Total Transport Systems and MRF Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRF Limited and Total Transport 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 Total Transport Systems 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 Total Transport i.e., Total Transport and MRF go up and down completely randomly.

Pair Corralation between Total Transport and MRF

Assuming the 90 days trading horizon Total Transport Systems is expected to under-perform the MRF. In addition to that, Total Transport is 2.03 times more volatile than MRF Limited. It trades about -0.16 of its total potential returns per unit of risk. MRF Limited is currently generating about -0.11 per unit of volatility. If you would invest  13,258,000  in MRF Limited on October 9, 2024 and sell it today you would lose (971,000) from holding MRF Limited or give up 7.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Total Transport Systems  vs.  MRF Limited

Total Transport Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Total Transport Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 unsteady 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 Total Transport and MRF

The main advantage of trading using opposite Total Transport and MRF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Transport 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 Total Transport Systems 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.