Correlation Between Computer Age and Bank of Maharashtra

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

By analyzing existing cross correlation between Computer Age Management and Bank of Maharashtra, you can compare the effects of market volatilities on Computer Age and Bank of Maharashtra 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 Computer Age with a short position of Bank of Maharashtra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Computer Age and Bank of Maharashtra.

Diversification Opportunities for Computer Age and Bank of Maharashtra

0.62

Correlation Coefficient

Computer Age  Bank of Maharashtra

Poor diversification

The 3 months correlation between Computer and Bank is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Computer Age Management and Bank of Maharashtra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Maharashtra and Computer Age 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 Computer Age Management are associated (or correlated) with Bank of Maharashtra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Maharashtra has no effect on the direction of Computer Age i.e., Computer Age and Bank of Maharashtra go up and down completely randomly.

Pair Corralation between Computer Age and Bank of Maharashtra

Assuming the 90 days trading horizon Computer Age Management is expected to under-perform the Bank of Maharashtra. But the stock apears to be less risky and, when comparing its historical volatility, Computer Age Management is 1.69 times less risky than Bank of Maharashtra. The stock trades about -0.21 of its potential returns per unit of risk. The Bank of Maharashtra is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  5,413  in Bank of Maharashtra on October 23, 2024 and sell it today you would lose (203.00) from holding Bank of Maharashtra or give up 3.75% of portfolio value over 90 days.

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

Computer Age Management  vs.  Bank of Maharashtra

Computer Age Management

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Computer Age Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Computer Age is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Bank of Maharashtra

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Maharashtra are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Bank of Maharashtra is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Computer Age and Bank of Maharashtra

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

The idea behind Computer Age Management and Bank of Maharashtra 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.