Correlation Between Credo Brands and Maithan Alloys

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

By analyzing existing cross correlation between Credo Brands Marketing and Maithan Alloys Limited, you can compare the effects of market volatilities on Credo Brands and Maithan Alloys 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 Credo Brands with a short position of Maithan Alloys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credo Brands and Maithan Alloys.

Diversification Opportunities for Credo Brands and Maithan Alloys

0.41

Correlation Coefficient

Credo Brands  Maithan Alloys

Very weak diversification

The 3 months correlation between Credo and Maithan is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Credo Brands Marketing and Maithan Alloys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maithan Alloys and Credo Brands 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 Credo Brands Marketing are associated (or correlated) with Maithan Alloys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maithan Alloys has no effect on the direction of Credo Brands i.e., Credo Brands and Maithan Alloys go up and down completely randomly.

Pair Corralation between Credo Brands and Maithan Alloys

Assuming the 90 days trading horizon Credo Brands Marketing is expected to under-perform the Maithan Alloys. In addition to that, Credo Brands is 1.14 times more volatile than Maithan Alloys Limited. It trades about -0.13 of its total potential returns per unit of risk. Maithan Alloys Limited is currently generating about -0.08 per unit of volatility. If you would invest  120,870  in Maithan Alloys Limited on October 8, 2024 and sell it today you would lose (4,810) from holding Maithan Alloys Limited or give up 3.98% of portfolio value over 90 days.

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

Credo Brands Marketing  vs.  Maithan Alloys Limited

Credo Brands Marketing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Credo Brands Marketing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Credo Brands is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Maithan Alloys

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Maithan Alloys Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Maithan Alloys may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Credo Brands and Maithan Alloys

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

The idea behind Credo Brands Marketing and Maithan Alloys 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.