Correlation Between Heritage Foods and Muthoot Finance

Can any of the company-specific risk be diversified away by investing in both Heritage Foods and Muthoot Finance 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 Heritage Foods and Muthoot Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Heritage Foods Limited and Muthoot Finance Limited, you can compare the effects of market volatilities on Heritage Foods and Muthoot Finance 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 Heritage Foods with a short position of Muthoot Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heritage Foods and Muthoot Finance.

Diversification Opportunities for Heritage Foods and Muthoot Finance

-0.11

Correlation Coefficient

Heritage Foods  Muthoot Finance

Good diversification

The 3 months correlation between Heritage and Muthoot is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Foods Limited and Muthoot Finance Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muthoot Finance and Heritage Foods 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 Heritage Foods Limited are associated (or correlated) with Muthoot Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muthoot Finance has no effect on the direction of Heritage Foods i.e., Heritage Foods and Muthoot Finance go up and down completely randomly.

Pair Corralation between Heritage Foods and Muthoot Finance

Assuming the 90 days trading horizon Heritage Foods Limited is expected to generate 1.67 times more return on investment than Muthoot Finance. However, Heritage Foods is 1.67 times more volatile than Muthoot Finance Limited. It trades about 0.12 of its potential returns per unit of risk. Muthoot Finance Limited is currently generating about 0.13 per unit of risk. If you would invest  13,580  in Heritage Foods Limited on October 5, 2024 and sell it today you would earn a total of  35,000  from holding Heritage Foods Limited or generate 257.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.78%
Values	Daily Returns

Heritage Foods Limited  vs.  Muthoot Finance Limited

Heritage Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heritage Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Muthoot Finance

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Muthoot Finance Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Muthoot Finance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heritage Foods and Muthoot Finance

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

The idea behind Heritage Foods Limited and Muthoot Finance 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.