Correlation Between Garware Hi and Maharashtra Seamless

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

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

Diversification Opportunities for Garware Hi and Maharashtra Seamless

0.75

Correlation Coefficient

Garware Hi  Maharashtra Seamless

Poor diversification

The 3 months correlation between Garware and Maharashtra is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Garware Hi Tech Films and Maharashtra Seamless Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maharashtra Seamless and Garware Hi 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 Garware Hi Tech Films are associated (or correlated) with Maharashtra Seamless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maharashtra Seamless has no effect on the direction of Garware Hi i.e., Garware Hi and Maharashtra Seamless go up and down completely randomly.

Pair Corralation between Garware Hi and Maharashtra Seamless

Assuming the 90 days trading horizon Garware Hi Tech Films is expected to generate 1.78 times more return on investment than Maharashtra Seamless. However, Garware Hi is 1.78 times more volatile than Maharashtra Seamless Limited. It trades about 0.19 of its potential returns per unit of risk. Maharashtra Seamless Limited is currently generating about 0.05 per unit of risk. If you would invest  250,044  in Garware Hi Tech Films on September 30, 2024 and sell it today you would earn a total of  270,391  from holding Garware Hi Tech Films or generate 108.14% return on investment over 90 days.

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

Garware Hi Tech Films  vs.  Maharashtra Seamless Limited

Garware Hi Tech

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Garware Hi Tech Films are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Garware Hi unveiled solid returns over the last few months and may actually be approaching a breakup point.

Maharashtra Seamless

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Maharashtra Seamless Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain essential indicators, Maharashtra Seamless may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Garware Hi and Maharashtra Seamless

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

The idea behind Garware Hi Tech Films and Maharashtra Seamless 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.