Correlation Between Jai Balaji and Maithan Alloys

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

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

Diversification Opportunities for Jai Balaji and Maithan Alloys

-0.29

Correlation Coefficient

Jai Balaji  Maithan Alloys

Very good diversification

The 3 months correlation between Jai and Maithan is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Jai Balaji Industries and Maithan Alloys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maithan Alloys and Jai Balaji 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 Jai Balaji Industries 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 Jai Balaji i.e., Jai Balaji and Maithan Alloys go up and down completely randomly.

Pair Corralation between Jai Balaji and Maithan Alloys

Assuming the 90 days trading horizon Jai Balaji Industries is expected to under-perform the Maithan Alloys. In addition to that, Jai Balaji is 1.27 times more volatile than Maithan Alloys Limited. It trades about -0.07 of its total potential returns per unit of risk. Maithan Alloys Limited is currently generating about 0.06 per unit of volatility. If you would invest  107,960  in Maithan Alloys Limited on October 5, 2024 and sell it today you would earn a total of  6,640  from holding Maithan Alloys Limited or generate 6.15% return on investment over 90 days.

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

Jai Balaji Industries  vs.  Maithan Alloys Limited

Jai Balaji Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jai Balaji Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Maithan Alloys

Risk-Adjusted Performance

4 of 100

Weak

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

Pair Trading with Jai Balaji and Maithan Alloys

The main advantage of trading using opposite Jai Balaji and Maithan Alloys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jai Balaji 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 Jai Balaji Industries 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.