Correlation Between MRF and ITI
Can any of the company-specific risk be diversified away by investing in both MRF and ITI 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 ITI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MRF Limited and ITI Limited, you can compare the effects of market volatilities on MRF and ITI 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 ITI. Check out your portfolio center. Please also check ongoing floating volatility patterns of MRF and ITI.
Diversification Opportunities for MRF and ITI
Significant diversification
The 3 months correlation between MRF and ITI is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding MRF Limited and ITI Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITI Limited 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 ITI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITI Limited has no effect on the direction of MRF i.e., MRF and ITI go up and down completely randomly.
Pair Corralation between MRF and ITI
Assuming the 90 days trading horizon MRF Limited is expected to under-perform the ITI. But the stock apears to be less risky and, when comparing its historical volatility, MRF Limited is 6.92 times less risky than ITI. The stock trades about -0.66 of its potential returns per unit of risk. The ITI Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 37,300 in ITI Limited on October 16, 2024 and sell it today you would earn a total of 4,760 from holding ITI Limited or generate 12.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
MRF Limited vs. ITI Limited
Performance |
| Timeline |
| MRF Limited |
| ITI Limited |
MRF and ITI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MRF and ITI
The main advantage of trading using opposite MRF and ITI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MRF position performs unexpectedly, ITI 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 ITI will offset losses from the drop in ITI's long position.| MRF vs. Privi Speciality Chemicals | MRF vs. Shree Pushkar Chemicals | MRF vs. Hilton Metal Forging | MRF vs. Fertilizers and Chemicals |
| ITI vs. City Union Bank | ITI vs. Landmark Cars Limited | ITI vs. General Insurance | ITI vs. Pilani Investment and |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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