Correlation Between Maithan Alloys and Foods Inns

Can any of the company-specific risk be diversified away by investing in both Maithan Alloys and Foods Inns 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 Foods Inns 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 Foods Inns Limited, you can compare the effects of market volatilities on Maithan Alloys and Foods Inns 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 Foods Inns. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maithan Alloys and Foods Inns.

Diversification Opportunities for Maithan Alloys and Foods Inns

0.06

Correlation Coefficient

Maithan Alloys  Foods Inns

Significant diversification

The 3 months correlation between Maithan and Foods is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Maithan Alloys Limited and Foods Inns Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foods Inns Limited 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 Foods Inns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foods Inns Limited has no effect on the direction of Maithan Alloys i.e., Maithan Alloys and Foods Inns go up and down completely randomly.

Pair Corralation between Maithan Alloys and Foods Inns

Assuming the 90 days trading horizon Maithan Alloys Limited is expected to generate 1.93 times more return on investment than Foods Inns. However, Maithan Alloys is 1.93 times more volatile than Foods Inns Limited. It trades about 0.09 of its potential returns per unit of risk. Foods Inns Limited is currently generating about -0.07 per unit of risk. If you would invest  106,560  in Maithan Alloys Limited on September 29, 2024 and sell it today you would earn a total of  4,620  from holding Maithan Alloys Limited or generate 4.34% return on investment over 90 days.

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

Maithan Alloys Limited  vs.  Foods Inns Limited

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 recent stock price disarray, may contribute to short-term losses for the investors.

Foods Inns Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Maithan Alloys and Foods Inns

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

The idea behind Maithan Alloys Limited and Foods Inns 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.