Correlation Between Chambal Fertilizers and Maithan Alloys

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

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

Diversification Opportunities for Chambal Fertilizers and Maithan Alloys

0.67

Correlation Coefficient

Chambal Fertilizers  Maithan Alloys

Poor diversification

The 3 months correlation between Chambal and Maithan is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Chambal Fertilizers Chemicals and Maithan Alloys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maithan Alloys and Chambal Fertilizers 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 Chambal Fertilizers Chemicals 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 Chambal Fertilizers i.e., Chambal Fertilizers and Maithan Alloys go up and down completely randomly.

Pair Corralation between Chambal Fertilizers and Maithan Alloys

Assuming the 90 days trading horizon Chambal Fertilizers Chemicals is expected to generate 1.04 times more return on investment than Maithan Alloys. However, Chambal Fertilizers is 1.04 times more volatile than Maithan Alloys Limited. It trades about 0.05 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  46,879  in Chambal Fertilizers Chemicals on October 24, 2024 and sell it today you would earn a total of  2,416  from holding Chambal Fertilizers Chemicals or generate 5.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Chambal Fertilizers Chemicals  vs.  Maithan Alloys Limited

Chambal Fertilizers

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chambal Fertilizers Chemicals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, Chambal Fertilizers may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Maithan Alloys

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Chambal Fertilizers and Maithan Alloys

The main advantage of trading using opposite Chambal Fertilizers and Maithan Alloys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chambal Fertilizers 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 Chambal Fertilizers Chemicals 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.