Correlation Between Maithan Alloys and Rashtriya Chemicals

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

Diversification Opportunities for Maithan Alloys and Rashtriya Chemicals

0.66

Correlation Coefficient

Maithan Alloys  Rashtriya Chemicals

Poor diversification

The 3 months correlation between Maithan and Rashtriya is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Maithan Alloys Limited and Rashtriya Chemicals and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rashtriya Chemicals and 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 Rashtriya Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rashtriya Chemicals and has no effect on the direction of Maithan Alloys i.e., Maithan Alloys and Rashtriya Chemicals go up and down completely randomly.

Pair Corralation between Maithan Alloys and Rashtriya Chemicals

Assuming the 90 days trading horizon Maithan Alloys is expected to generate 5.05 times less return on investment than Rashtriya Chemicals. But when comparing it to its historical volatility, Maithan Alloys Limited is 1.34 times less risky than Rashtriya Chemicals. It trades about 0.01 of its potential returns per unit of risk. Rashtriya Chemicals and is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9,547  in Rashtriya Chemicals and on December 4, 2024 and sell it today you would earn a total of  2,219  from holding Rashtriya Chemicals and or generate 23.24% return on investment over 90 days.

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

Maithan Alloys Limited  vs.  Rashtriya Chemicals and

Maithan Alloys

Risk-Adjusted Performance

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 inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Rashtriya Chemicals and

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rashtriya Chemicals and 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Maithan Alloys and Rashtriya Chemicals

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

The idea behind Maithan Alloys Limited and Rashtriya Chemicals and 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.