Correlation Between Maithan Alloys and City Union

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

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

Diversification Opportunities for Maithan Alloys and City Union

0.23

Correlation Coefficient

Maithan Alloys  City Union

Modest diversification

The 3 months correlation between Maithan and City is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Maithan Alloys Limited and City Union Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Union Bank and Maithan Alloys 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 Maithan Alloys Limited are associated (or correlated) with City Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Union Bank has no effect on the direction of Maithan Alloys i.e., Maithan Alloys and City Union go up and down completely randomly.

Pair Corralation between Maithan Alloys and City Union

Assuming the 90 days trading horizon Maithan Alloys Limited is expected to generate 1.85 times more return on investment than City Union. However, Maithan Alloys is 1.85 times more volatile than City Union Bank. It trades about 0.19 of its potential returns per unit of risk. City Union Bank is currently generating about 0.02 per unit of risk. If you would invest  106,795  in Maithan Alloys Limited on September 24, 2024 and sell it today you would earn a total of  10,365  from holding Maithan Alloys Limited or generate 9.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Maithan Alloys Limited  vs.  City Union Bank

Maithan Alloys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maithan Alloys Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Maithan Alloys is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

City Union Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in City Union Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, City Union is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Maithan Alloys and City Union

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

The idea behind Maithan Alloys Limited and City Union Bank 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.