Correlation Between Itafos and Maxim Power

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

By analyzing existing cross correlation between Itafos Inc and Maxim Power Corp, you can compare the effects of market volatilities on Itafos and Maxim Power 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 Itafos with a short position of Maxim Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itafos and Maxim Power.

Diversification Opportunities for Itafos and Maxim Power

0.27

Correlation Coefficient

Itafos  Maxim Power

Modest diversification

The 3 months correlation between Itafos and Maxim is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Itafos Inc and Maxim Power Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxim Power Corp and Itafos 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 Itafos Inc are associated (or correlated) with Maxim Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxim Power Corp has no effect on the direction of Itafos i.e., Itafos and Maxim Power go up and down completely randomly.

Pair Corralation between Itafos and Maxim Power

Given the investment horizon of 90 days Itafos is expected to generate 4.43 times less return on investment than Maxim Power. But when comparing it to its historical volatility, Itafos Inc is 1.32 times less risky than Maxim Power. It trades about 0.07 of its potential returns per unit of risk. Maxim Power Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  277.00  in Maxim Power Corp on October 5, 2024 and sell it today you would earn a total of  145.00  from holding Maxim Power Corp or generate 52.35% return on investment over 90 days.

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

Itafos Inc  vs.  Maxim Power Corp

Itafos Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Itafos Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental indicators, Itafos may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Maxim Power Corp

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Maxim Power Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Maxim Power reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Itafos and Maxim Power

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

The idea behind Itafos Inc and Maxim Power Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.