Correlation Between Embassy Office and Maharashtra Scooters

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

By analyzing existing cross correlation between Embassy Office Parks and Maharashtra Scooters Limited, you can compare the effects of market volatilities on Embassy Office and Maharashtra Scooters 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 Embassy Office with a short position of Maharashtra Scooters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embassy Office and Maharashtra Scooters.

Diversification Opportunities for Embassy Office and Maharashtra Scooters

0.69

Correlation Coefficient

Embassy Office  Maharashtra Scooters

Poor diversification

The 3 months correlation between Embassy and Maharashtra is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Embassy Office Parks and Maharashtra Scooters Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maharashtra Scooters and Embassy Office 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 Embassy Office Parks are associated (or correlated) with Maharashtra Scooters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maharashtra Scooters has no effect on the direction of Embassy Office i.e., Embassy Office and Maharashtra Scooters go up and down completely randomly.

Pair Corralation between Embassy Office and Maharashtra Scooters

Assuming the 90 days trading horizon Embassy Office is expected to generate 1.28 times less return on investment than Maharashtra Scooters. But when comparing it to its historical volatility, Embassy Office Parks is 1.42 times less risky than Maharashtra Scooters. It trades about 0.06 of its potential returns per unit of risk. Maharashtra Scooters Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  765,685  in Maharashtra Scooters Limited on October 8, 2024 and sell it today you would earn a total of  208,120  from holding Maharashtra Scooters Limited or generate 27.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.26%
Values	Daily Returns

Embassy Office Parks  vs.  Maharashtra Scooters Limited

Embassy Office Parks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embassy Office Parks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Embassy Office is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Maharashtra Scooters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maharashtra Scooters Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Embassy Office and Maharashtra Scooters

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

The idea behind Embassy Office Parks and Maharashtra Scooters 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.