Correlation Between Maithan Alloys and TPL Plastech

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

Diversification Opportunities for Maithan Alloys and TPL Plastech

0.63

Correlation Coefficient

Maithan Alloys  TPL Plastech

Poor diversification

The 3 months correlation between Maithan and TPL is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Maithan Alloys Limited and TPL Plastech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPL Plastech 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 TPL Plastech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPL Plastech Limited has no effect on the direction of Maithan Alloys i.e., Maithan Alloys and TPL Plastech go up and down completely randomly.

Pair Corralation between Maithan Alloys and TPL Plastech

Assuming the 90 days trading horizon Maithan Alloys Limited is expected to generate 0.92 times more return on investment than TPL Plastech. However, Maithan Alloys Limited is 1.09 times less risky than TPL Plastech. It trades about -0.03 of its potential returns per unit of risk. TPL Plastech Limited is currently generating about -0.04 per unit of risk. If you would invest  112,291  in Maithan Alloys Limited on September 3, 2024 and sell it today you would lose (5,726) from holding Maithan Alloys Limited or give up 5.1% of portfolio value over 90 days.

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

Maithan Alloys Limited  vs.  TPL Plastech 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 latest stock price disarray, may contribute to short-term losses for the investors.

TPL Plastech Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPL Plastech Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, TPL Plastech is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Maithan Alloys and TPL Plastech

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

The idea behind Maithan Alloys Limited and TPL Plastech 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.