Correlation Between Adroit Infotech and Muthoot Finance

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

By analyzing existing cross correlation between Adroit Infotech Limited and Muthoot Finance Limited, you can compare the effects of market volatilities on Adroit Infotech and Muthoot Finance 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 Adroit Infotech with a short position of Muthoot Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adroit Infotech and Muthoot Finance.

Diversification Opportunities for Adroit Infotech and Muthoot Finance

-0.49

Correlation Coefficient

Adroit Infotech  Muthoot Finance

Very good diversification

The 3 months correlation between Adroit and Muthoot is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Adroit Infotech Limited and Muthoot Finance Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muthoot Finance and Adroit Infotech 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 Adroit Infotech Limited are associated (or correlated) with Muthoot Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muthoot Finance has no effect on the direction of Adroit Infotech i.e., Adroit Infotech and Muthoot Finance go up and down completely randomly.

Pair Corralation between Adroit Infotech and Muthoot Finance

Assuming the 90 days trading horizon Adroit Infotech Limited is expected to under-perform the Muthoot Finance. In addition to that, Adroit Infotech is 2.29 times more volatile than Muthoot Finance Limited. It trades about -0.04 of its total potential returns per unit of risk. Muthoot Finance Limited is currently generating about 0.12 per unit of volatility. If you would invest  194,545  in Muthoot Finance Limited on October 11, 2024 and sell it today you would earn a total of  23,375  from holding Muthoot Finance Limited or generate 12.02% return on investment over 90 days.

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

Adroit Infotech Limited  vs.  Muthoot Finance Limited

Adroit Infotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adroit Infotech Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Muthoot Finance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Muthoot Finance Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Muthoot Finance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Adroit Infotech and Muthoot Finance

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

The idea behind Adroit Infotech Limited and Muthoot Finance 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.