Correlation Between Max Financial and Reliance Home

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

Diversification Opportunities for Max Financial and Reliance Home

0.21

Correlation Coefficient

Max Financial  Reliance Home

Modest diversification

The 3 months correlation between Max and Reliance is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Max Financial Services and Reliance Home Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Home Finance 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 Reliance Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Home Finance has no effect on the direction of Max Financial i.e., Max Financial and Reliance Home go up and down completely randomly.

Pair Corralation between Max Financial and Reliance Home

Assuming the 90 days trading horizon Max Financial Services is expected to generate 0.49 times more return on investment than Reliance Home. However, Max Financial Services is 2.04 times less risky than Reliance Home. It trades about -0.05 of its potential returns per unit of risk. Reliance Home Finance is currently generating about -0.04 per unit of risk. If you would invest  117,960  in Max Financial Services on September 25, 2024 and sell it today you would lose (7,570) from holding Max Financial Services or give up 6.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Max Financial Services  vs.  Reliance Home Finance

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Reliance Home Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Home Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating 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.

Pair Trading with Max Financial and Reliance Home

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

The idea behind Max Financial Services and Reliance Home Finance 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 Stocks Directory module to find actively traded stocks across global markets.