Correlation Between Maithan Alloys and Indo Borax

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

Diversification Opportunities for Maithan Alloys and Indo Borax

0.26

Correlation Coefficient

Maithan Alloys  Indo Borax

Modest diversification

The 3 months correlation between Maithan and Indo is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Maithan Alloys Limited and Indo Borax Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Borax Chemicals 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 Indo Borax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Borax Chemicals has no effect on the direction of Maithan Alloys i.e., Maithan Alloys and Indo Borax go up and down completely randomly.

Pair Corralation between Maithan Alloys and Indo Borax

Assuming the 90 days trading horizon Maithan Alloys is expected to generate 2.57 times less return on investment than Indo Borax. But when comparing it to its historical volatility, Maithan Alloys Limited is 1.29 times less risky than Indo Borax. It trades about 0.02 of its potential returns per unit of risk. Indo Borax Chemicals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  13,067  in Indo Borax Chemicals on October 4, 2024 and sell it today you would earn a total of  4,852  from holding Indo Borax Chemicals or generate 37.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.38%
Values	Daily Returns

Maithan Alloys Limited  vs.  Indo Borax Chemicals

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.

Indo Borax Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Borax Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Maithan Alloys and Indo Borax

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

The idea behind Maithan Alloys Limited and Indo Borax Chemicals 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.