Correlation Between 21st Century and Maithan Alloys

Can any of the company-specific risk be diversified away by investing in both 21st Century and Maithan Alloys 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 21st Century and Maithan Alloys into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 21st Century Management and Maithan Alloys Limited, you can compare the effects of market volatilities on 21st Century and Maithan Alloys 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 21st Century with a short position of Maithan Alloys. Check out your portfolio center. Please also check ongoing floating volatility patterns of 21st Century and Maithan Alloys.

Diversification Opportunities for 21st Century and Maithan Alloys

-0.68

Correlation Coefficient

21st Century  Maithan Alloys

Excellent diversification

The 3 months correlation between 21st and Maithan is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding 21st Century Management and Maithan Alloys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maithan Alloys and 21st Century 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 21st Century Management are associated (or correlated) with Maithan Alloys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maithan Alloys has no effect on the direction of 21st Century i.e., 21st Century and Maithan Alloys go up and down completely randomly.

Pair Corralation between 21st Century and Maithan Alloys

Assuming the 90 days trading horizon 21st Century Management is expected to generate 0.9 times more return on investment than Maithan Alloys. However, 21st Century Management is 1.11 times less risky than Maithan Alloys. It trades about 0.24 of its potential returns per unit of risk. Maithan Alloys Limited is currently generating about 0.01 per unit of risk. If you would invest  3,179  in 21st Century Management on October 6, 2024 and sell it today you would earn a total of  6,121  from holding 21st Century Management or generate 192.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.59%
Values	Daily Returns

21st Century Management  vs.  Maithan Alloys Limited

21st Century Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 21st Century Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, 21st Century is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Maithan Alloys

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Maithan Alloys Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Maithan Alloys may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with 21st Century and Maithan Alloys

The main advantage of trading using opposite 21st Century and Maithan Alloys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 21st Century position performs unexpectedly, Maithan Alloys 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 Maithan Alloys will offset losses from the drop in Maithan Alloys' long position.

The idea behind 21st Century Management and Maithan Alloys 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.