Correlation Between MRF and Data Patterns

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

By analyzing existing cross correlation between MRF Limited and Data Patterns Limited, you can compare the effects of market volatilities on MRF and Data Patterns 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 Data Patterns. Check out your portfolio center. Please also check ongoing floating volatility patterns of MRF and Data Patterns.

Diversification Opportunities for MRF and Data Patterns

0.48

Correlation Coefficient

MRF  Data Patterns

Very weak diversification

The 3 months correlation between MRF and Data is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding MRF Limited and Data Patterns Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data Patterns 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 Data Patterns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data Patterns Limited has no effect on the direction of MRF i.e., MRF and Data Patterns go up and down completely randomly.

Pair Corralation between MRF and Data Patterns

Assuming the 90 days trading horizon MRF is expected to generate 2.03 times less return on investment than Data Patterns. But when comparing it to its historical volatility, MRF Limited is 2.63 times less risky than Data Patterns. It trades about 0.19 of its potential returns per unit of risk. Data Patterns Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  208,660  in Data Patterns Limited on April 25, 2025 and sell it today you would earn a total of  69,120  from holding Data Patterns Limited or generate 33.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

MRF Limited  vs.  Data Patterns Limited

MRF Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MRF Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, MRF exhibited solid returns over the last few months and may actually be approaching a breakup point.

Data Patterns Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Data Patterns Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Data Patterns unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MRF and Data Patterns

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

The idea behind MRF Limited and Data Patterns 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.