Correlation Between Cantabil Retail and Maithan Alloys

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

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

Diversification Opportunities for Cantabil Retail and Maithan Alloys

0.6

Correlation Coefficient

Cantabil Retail  Maithan Alloys

Poor diversification

The 3 months correlation between Cantabil and Maithan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cantabil Retail India and Maithan Alloys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maithan Alloys and Cantabil Retail 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 Cantabil Retail India 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 Cantabil Retail i.e., Cantabil Retail and Maithan Alloys go up and down completely randomly.

Pair Corralation between Cantabil Retail and Maithan Alloys

Assuming the 90 days trading horizon Cantabil Retail India is expected to generate 1.19 times more return on investment than Maithan Alloys. However, Cantabil Retail is 1.19 times more volatile than Maithan Alloys Limited. It trades about 0.18 of its potential returns per unit of risk. Maithan Alloys Limited is currently generating about 0.07 per unit of risk. If you would invest  23,356  in Cantabil Retail India on October 8, 2024 and sell it today you would earn a total of  6,284  from holding Cantabil Retail India or generate 26.91% return on investment over 90 days.

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

Cantabil Retail India  vs.  Maithan Alloys Limited

Cantabil Retail India

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cantabil Retail India are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Cantabil Retail demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 unfluctuating basic indicators, Maithan Alloys may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cantabil Retail and Maithan Alloys

The main advantage of trading using opposite Cantabil Retail and Maithan Alloys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cantabil Retail 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 Cantabil Retail India 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.