Correlation Between MRF and Transport

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

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

Diversification Opportunities for MRF and Transport

0.66

Correlation Coefficient

MRF  Transport

Poor diversification

The 3 months correlation between MRF and Transport is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding MRF Limited and Transport of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transport 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 Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transport has no effect on the direction of MRF i.e., MRF and Transport go up and down completely randomly.

Pair Corralation between MRF and Transport

Assuming the 90 days trading horizon MRF Limited is expected to generate 0.75 times more return on investment than Transport. However, MRF Limited is 1.33 times less risky than Transport. It trades about 0.19 of its potential returns per unit of risk. Transport of is currently generating about 0.12 per unit of risk. If you would invest  12,660,700  in MRF Limited on April 20, 2025 and sell it today you would earn a total of  2,145,300  from holding MRF Limited or generate 16.94% return on investment over 90 days.

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

MRF Limited  vs.  Transport of

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 unfluctuating technical and fundamental indicators, MRF exhibited solid returns over the last few months and may actually be approaching a breakup point.

Transport

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transport of are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Transport exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MRF and Transport

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

The idea behind MRF Limited and Transport of 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.