Correlation Between Maithan Alloys and Industrial Investment

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

Diversification Opportunities for Maithan Alloys and Industrial Investment

0.08

Correlation Coefficient

Maithan Alloys  Industrial Investment

Significant diversification

The 3 months correlation between Maithan and Industrial is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Maithan Alloys Limited and Industrial Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Investment 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 Industrial Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Investment has no effect on the direction of Maithan Alloys i.e., Maithan Alloys and Industrial Investment go up and down completely randomly.

Pair Corralation between Maithan Alloys and Industrial Investment

Assuming the 90 days trading horizon Maithan Alloys Limited is expected to generate 0.96 times more return on investment than Industrial Investment. However, Maithan Alloys Limited is 1.04 times less risky than Industrial Investment. It trades about 0.14 of its potential returns per unit of risk. Industrial Investment Trust is currently generating about 0.03 per unit of risk. If you would invest  106,340  in Maithan Alloys Limited on September 27, 2024 and sell it today you would earn a total of  8,040  from holding Maithan Alloys Limited or generate 7.56% 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.  Industrial Investment Trust

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

Industrial Investment

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Investment Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Industrial Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Maithan Alloys and Industrial Investment

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

The idea behind Maithan Alloys Limited and Industrial Investment Trust 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.