Correlation Between Max Healthcare and Sumitomo Chemical

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

Diversification Opportunities for Max Healthcare and Sumitomo Chemical

0.74

Correlation Coefficient

Max Healthcare  Sumitomo Chemical

Poor diversification

The 3 months correlation between Max and Sumitomo is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Max Healthcare Institute and Sumitomo Chemical India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical India 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 Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical India has no effect on the direction of Max Healthcare i.e., Max Healthcare and Sumitomo Chemical go up and down completely randomly.

Pair Corralation between Max Healthcare and Sumitomo Chemical

Assuming the 90 days trading horizon Max Healthcare is expected to generate 1.23 times less return on investment than Sumitomo Chemical. In addition to that, Max Healthcare is 1.39 times more volatile than Sumitomo Chemical India. It trades about 0.02 of its total potential returns per unit of risk. Sumitomo Chemical India is currently generating about 0.03 per unit of volatility. If you would invest  51,880  in Sumitomo Chemical India on December 27, 2024 and sell it today you would earn a total of  1,155  from holding Sumitomo Chemical India or generate 2.23% return on investment over 90 days.

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

Max Healthcare Institute  vs.  Sumitomo Chemical India

Max Healthcare Institute

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Max Healthcare Institute are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Max Healthcare is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Sumitomo Chemical India

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Chemical India are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Sumitomo Chemical is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Max Healthcare and Sumitomo Chemical

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

The idea behind Max Healthcare Institute and Sumitomo Chemical India 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.