Correlation Between Usha Martin and Engineers India

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

By analyzing existing cross correlation between Usha Martin Education and Engineers India Limited, you can compare the effects of market volatilities on Usha Martin and Engineers India 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 Usha Martin with a short position of Engineers India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Usha Martin and Engineers India.

Diversification Opportunities for Usha Martin and Engineers India

0.7

Correlation Coefficient

Usha Martin  Engineers India

Poor diversification

The 3 months correlation between Usha and Engineers is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Usha Martin Education and Engineers India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engineers India and Usha Martin 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 Usha Martin Education are associated (or correlated) with Engineers India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engineers India has no effect on the direction of Usha Martin i.e., Usha Martin and Engineers India go up and down completely randomly.

Pair Corralation between Usha Martin and Engineers India

Assuming the 90 days trading horizon Usha Martin Education is expected to under-perform the Engineers India. But the stock apears to be less risky and, when comparing its historical volatility, Usha Martin Education is 1.15 times less risky than Engineers India. The stock trades about -0.17 of its potential returns per unit of risk. The Engineers India Limited is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  17,536  in Engineers India Limited on December 28, 2024 and sell it today you would lose (1,753) from holding Engineers India Limited or give up 10.0% of portfolio value over 90 days.

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

Usha Martin Education  vs.  Engineers India Limited

Usha Martin Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days Usha Martin Education 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 essential 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.

Engineers India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Engineers India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic 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 Usha Martin and Engineers India

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

The idea behind Usha Martin Education and Engineers India 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.