Correlation Between MRF and City Union
Can any of the company-specific risk be diversified away by investing in both MRF and City Union 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 MRF and City Union into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MRF Limited and City Union Bank, you can compare the effects of market volatilities on MRF and City Union 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 MRF with a short position of City Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of MRF and City Union.
Diversification Opportunities for MRF and City Union
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MRF and City is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding MRF Limited and City Union Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Union Bank and MRF 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 MRF Limited are associated (or correlated) with City Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Union Bank has no effect on the direction of MRF i.e., MRF and City Union go up and down completely randomly.
Pair Corralation between MRF and City Union
Assuming the 90 days trading horizon MRF Limited is expected to under-perform the City Union. But the stock apears to be less risky and, when comparing its historical volatility, MRF Limited is 2.02 times less risky than City Union. The stock trades about -0.26 of its potential returns per unit of risk. The City Union Bank is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 16,385 in City Union Bank on August 28, 2024 and sell it today you would earn a total of 995.00 from holding City Union Bank or generate 6.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.56% |
| Values | Daily Returns |
MRF Limited vs. City Union Bank
Performance |
| Timeline |
| MRF Limited |
| City Union Bank |
MRF and City Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MRF and City Union
The main advantage of trading using opposite MRF and City Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MRF position performs unexpectedly, City Union 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 City Union will offset losses from the drop in City Union's long position.| MRF vs. JGCHEMICALS LIMITED | MRF vs. Pilani Investment and | MRF vs. DMCC SPECIALITY CHEMICALS | MRF vs. Tata Investment |
| City Union vs. Ankit Metal Power | City Union vs. Ratnamani Metals Tubes | City Union vs. Landmark Cars Limited | City Union vs. Shivalik Bimetal Controls |
Check out your portfolio center.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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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