Correlation Between Max Healthcare and Kothari Petrochemicals

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

Diversification Opportunities for Max Healthcare and Kothari Petrochemicals

-0.38

Correlation Coefficient

Max Healthcare  Kothari Petrochemicals

Very good diversification

The 3 months correlation between Max and Kothari is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Max Healthcare Institute and Kothari Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kothari Petrochemicals 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 Kothari Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kothari Petrochemicals has no effect on the direction of Max Healthcare i.e., Max Healthcare and Kothari Petrochemicals go up and down completely randomly.

Pair Corralation between Max Healthcare and Kothari Petrochemicals

Assuming the 90 days trading horizon Max Healthcare Institute is expected to generate 0.92 times more return on investment than Kothari Petrochemicals. However, Max Healthcare Institute is 1.09 times less risky than Kothari Petrochemicals. It trades about 0.16 of its potential returns per unit of risk. Kothari Petrochemicals Limited is currently generating about -0.18 per unit of risk. If you would invest  111,695  in Max Healthcare Institute on October 8, 2024 and sell it today you would earn a total of  6,140  from holding Max Healthcare Institute or generate 5.5% return on investment over 90 days.

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

Max Healthcare Institute  vs.  Kothari Petrochemicals Limited

Max Healthcare Institute

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Max Healthcare Institute are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, Max Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Kothari Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kothari Petrochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Max Healthcare and Kothari Petrochemicals

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

The idea behind Max Healthcare Institute and Kothari Petrochemicals 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.