Correlation Between Dupont De and Bank of Maharashtra

Can any of the company-specific risk be diversified away by investing in both Dupont De 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 Dupont De 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 Dupont De Nemours and Bank of Maharashtra, you can compare the effects of market volatilities on Dupont De 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 Dupont De with a short position of Bank of Maharashtra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and Bank of Maharashtra.

Diversification Opportunities for Dupont De and Bank of Maharashtra

-0.18

Correlation Coefficient

Dupont De  Bank of Maharashtra

Good diversification

The 3 months correlation between Dupont and Bank is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours 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 Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and Bank of Maharashtra go up and down completely randomly.

Pair Corralation between Dupont De and Bank of Maharashtra

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to generate 0.57 times more return on investment than Bank of Maharashtra. However, Dupont De Nemours is 1.75 times less risky than Bank of Maharashtra. It trades about -0.01 of its potential returns per unit of risk. Bank of Maharashtra is currently generating about -0.04 per unit of risk. If you would invest  7,557  in Dupont De Nemours on December 30, 2024 and sell it today you would lose (154.00) from holding Dupont De Nemours or give up 2.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Dupont De Nemours  vs.  Bank of Maharashtra

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Bank of Maharashtra

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of Maharashtra has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Dupont De and Bank of Maharashtra

The main advantage of trading using opposite Dupont De and Bank of Maharashtra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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 Dupont De Nemours 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.