Correlation Between Max Financial and Bharti Airtel

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

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

Diversification Opportunities for Max Financial and Bharti Airtel

0.06

Correlation Coefficient

Max Financial  Bharti Airtel

Significant diversification

The 3 months correlation between Max and Bharti is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Max Financial Services and Bharti Airtel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bharti Airtel Limited and Max 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 Max Financial Services are associated (or correlated) with Bharti Airtel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bharti Airtel Limited has no effect on the direction of Max Financial i.e., Max Financial and Bharti Airtel go up and down completely randomly.

Pair Corralation between Max Financial and Bharti Airtel

Assuming the 90 days trading horizon Max Financial Services is expected to under-perform the Bharti Airtel. In addition to that, Max Financial is 1.4 times more volatile than Bharti Airtel Limited. It trades about -0.05 of its total potential returns per unit of risk. Bharti Airtel Limited is currently generating about -0.07 per unit of volatility. If you would invest  170,955  in Bharti Airtel Limited on September 30, 2024 and sell it today you would lose (10,970) from holding Bharti Airtel Limited or give up 6.42% of portfolio value over 90 days.

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

Max Financial Services  vs.  Bharti Airtel Limited

Max Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Max Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Bharti Airtel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bharti Airtel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bharti Airtel is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Max Financial and Bharti Airtel

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

The idea behind Max Financial Services and Bharti Airtel 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.