Correlation Between Maithan Alloys and UltraTech Cement

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

Diversification Opportunities for Maithan Alloys and UltraTech Cement

0.8

Correlation Coefficient

Maithan Alloys  UltraTech Cement

Very poor diversification

The 3 months correlation between Maithan and UltraTech is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Maithan Alloys Limited and UltraTech Cement Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UltraTech Cement 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 UltraTech Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UltraTech Cement has no effect on the direction of Maithan Alloys i.e., Maithan Alloys and UltraTech Cement go up and down completely randomly.

Pair Corralation between Maithan Alloys and UltraTech Cement

Assuming the 90 days trading horizon Maithan Alloys Limited is expected to generate 1.51 times more return on investment than UltraTech Cement. However, Maithan Alloys is 1.51 times more volatile than UltraTech Cement Limited. It trades about 0.08 of its potential returns per unit of risk. UltraTech Cement Limited is currently generating about 0.01 per unit of risk. If you would invest  106,885  in Maithan Alloys Limited on September 12, 2024 and sell it today you would earn a total of  9,975  from holding Maithan Alloys Limited or generate 9.33% return on investment over 90 days.

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

Maithan Alloys Limited  vs.  UltraTech Cement Limited

Maithan Alloys

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Maithan Alloys Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Maithan Alloys may actually be approaching a critical reversion point that can send shares even higher in January 2025.

UltraTech Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UltraTech Cement Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, UltraTech Cement is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Maithan Alloys and UltraTech Cement

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

The idea behind Maithan Alloys Limited and UltraTech Cement 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.