Correlation Between Muthoot Finance and Ravi Kumar

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

Diversification Opportunities for Muthoot Finance and Ravi Kumar

-0.11

Correlation Coefficient

Muthoot Finance  Ravi Kumar

Good diversification

The 3 months correlation between Muthoot and Ravi is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Muthoot Finance Limited and Ravi Kumar Distilleries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ravi Kumar Distilleries 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 Ravi Kumar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ravi Kumar Distilleries has no effect on the direction of Muthoot Finance i.e., Muthoot Finance and Ravi Kumar go up and down completely randomly.

Pair Corralation between Muthoot Finance and Ravi Kumar

Assuming the 90 days trading horizon Muthoot Finance Limited is expected to generate 0.67 times more return on investment than Ravi Kumar. However, Muthoot Finance Limited is 1.5 times less risky than Ravi Kumar. It trades about 0.13 of its potential returns per unit of risk. Ravi Kumar Distilleries is currently generating about -0.04 per unit of risk. If you would invest  203,500  in Muthoot Finance Limited on December 25, 2024 and sell it today you would earn a total of  31,755  from holding Muthoot Finance Limited or generate 15.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Muthoot Finance Limited  vs.  Ravi Kumar Distilleries

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 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Muthoot Finance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ravi Kumar Distilleries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ravi Kumar Distilleries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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 Muthoot Finance and Ravi Kumar

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

The idea behind Muthoot Finance Limited and Ravi Kumar Distilleries 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.