Correlation Between Muthoot Finance and Adroit Infotech

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

By analyzing existing cross correlation between Muthoot Finance Limited and Adroit Infotech Limited, you can compare the effects of market volatilities on Muthoot Finance and Adroit Infotech 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 Muthoot Finance with a short position of Adroit Infotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Muthoot Finance and Adroit Infotech.

Diversification Opportunities for Muthoot Finance and Adroit Infotech

-0.69

Correlation Coefficient

Muthoot Finance  Adroit Infotech

Excellent diversification

The 3 months correlation between Muthoot and Adroit is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Muthoot Finance Limited and Adroit Infotech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adroit Infotech and Muthoot Finance 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 Muthoot Finance Limited are associated (or correlated) with Adroit Infotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adroit Infotech has no effect on the direction of Muthoot Finance i.e., Muthoot Finance and Adroit Infotech go up and down completely randomly.

Pair Corralation between Muthoot Finance and Adroit Infotech

Assuming the 90 days trading horizon Muthoot Finance Limited is expected to generate 0.55 times more return on investment than Adroit Infotech. However, Muthoot Finance Limited is 1.8 times less risky than Adroit Infotech. It trades about 0.1 of its potential returns per unit of risk. Adroit Infotech Limited is currently generating about -0.22 per unit of risk. If you would invest  210,150  in Muthoot Finance Limited on December 28, 2024 and sell it today you would earn a total of  23,640  from holding Muthoot Finance Limited or generate 11.25% return on investment over 90 days.

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

Muthoot Finance Limited  vs.  Adroit Infotech Limited

Muthoot Finance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Muthoot Finance Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Muthoot Finance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Adroit Infotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adroit Infotech Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Muthoot Finance and Adroit Infotech

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

The idea behind Muthoot Finance Limited and Adroit Infotech 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.