Correlation Between MAS Financial and Gujarat Fluorochemicals

Can any of the company-specific risk be diversified away by investing in both MAS Financial and Gujarat Fluorochemicals 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 MAS Financial and Gujarat Fluorochemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MAS Financial Services and Gujarat Fluorochemicals Limited, you can compare the effects of market volatilities on MAS Financial and Gujarat Fluorochemicals 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 MAS Financial with a short position of Gujarat Fluorochemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAS Financial and Gujarat Fluorochemicals.

Diversification Opportunities for MAS Financial and Gujarat Fluorochemicals

0.44

Correlation Coefficient

MAS Financial  Gujarat Fluorochemicals

Very weak diversification

The 3 months correlation between MAS and Gujarat is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding MAS Financial Services and Gujarat Fluorochemicals Limite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Fluorochemicals and MAS Financial 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 MAS Financial Services are associated (or correlated) with Gujarat Fluorochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Fluorochemicals has no effect on the direction of MAS Financial i.e., MAS Financial and Gujarat Fluorochemicals go up and down completely randomly.

Pair Corralation between MAS Financial and Gujarat Fluorochemicals

Assuming the 90 days trading horizon MAS Financial Services is expected to under-perform the Gujarat Fluorochemicals. But the stock apears to be less risky and, when comparing its historical volatility, MAS Financial Services is 1.79 times less risky than Gujarat Fluorochemicals. The stock trades about -0.02 of its potential returns per unit of risk. The Gujarat Fluorochemicals Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  316,577  in Gujarat Fluorochemicals Limited on September 4, 2024 and sell it today you would earn a total of  88,863  from holding Gujarat Fluorochemicals Limited or generate 28.07% return on investment over 90 days.

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

MAS Financial Services  vs.  Gujarat Fluorochemicals Limite

MAS Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAS Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, MAS Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Gujarat Fluorochemicals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Fluorochemicals Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, Gujarat Fluorochemicals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MAS Financial and Gujarat Fluorochemicals

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

The idea behind MAS Financial Services and Gujarat Fluorochemicals 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.