Correlation Between Max Financial and MphasiS

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

Diversification Opportunities for Max Financial and MphasiS

-0.35

Correlation Coefficient

Max Financial  MphasiS

Very good diversification

The 3 months correlation between Max and MphasiS is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Max Financial Services and MphasiS Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MphasiS 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 MphasiS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MphasiS Limited has no effect on the direction of Max Financial i.e., Max Financial and MphasiS go up and down completely randomly.

Pair Corralation between Max Financial and MphasiS

Assuming the 90 days trading horizon Max Financial is expected to generate 1.03 times less return on investment than MphasiS. But when comparing it to its historical volatility, Max Financial Services is 1.02 times less risky than MphasiS. It trades about 0.06 of its potential returns per unit of risk. MphasiS Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  190,708  in MphasiS Limited on September 4, 2024 and sell it today you would earn a total of  114,292  from holding MphasiS Limited or generate 59.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

Max Financial Services  vs.  MphasiS 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 comparatively stable basic indicators, Max Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

MphasiS Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MphasiS Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, MphasiS is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Max Financial and MphasiS

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

The idea behind Max Financial Services and MphasiS 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.