Correlation Between Max Healthcare and ITI

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

By analyzing existing cross correlation between Max Healthcare Institute and ITI Limited, you can compare the effects of market volatilities on Max Healthcare and ITI 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 Max Healthcare with a short position of ITI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Max Healthcare and ITI.

Diversification Opportunities for Max Healthcare and ITI

0.53

Correlation Coefficient

Max Healthcare  ITI

Very weak diversification

The 3 months correlation between Max and ITI is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Max Healthcare Institute and ITI Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITI Limited and Max Healthcare 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 Max Healthcare Institute are associated (or correlated) with ITI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITI Limited has no effect on the direction of Max Healthcare i.e., Max Healthcare and ITI go up and down completely randomly.

Pair Corralation between Max Healthcare and ITI

Assuming the 90 days trading horizon Max Healthcare is expected to generate 6.35 times less return on investment than ITI. But when comparing it to its historical volatility, Max Healthcare Institute is 3.22 times less risky than ITI. It trades about 0.15 of its potential returns per unit of risk. ITI Limited is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  22,391  in ITI Limited on October 6, 2024 and sell it today you would earn a total of  23,319  from holding ITI Limited or generate 104.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Max Healthcare Institute  vs.  ITI Limited

Max Healthcare Institute

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Max Healthcare Institute are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Max Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

ITI Limited

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ITI Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, ITI exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Max Healthcare and ITI

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

The idea behind Max Healthcare Institute and ITI 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.