Correlation Between Muthoot Finance and Tribhovandas Bhimji

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

Diversification Opportunities for Muthoot Finance and Tribhovandas Bhimji

0.34

Correlation Coefficient

Muthoot Finance  Tribhovandas Bhimji

Weak diversification

The 3 months correlation between Muthoot and Tribhovandas is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Muthoot Finance Limited and Tribhovandas Bhimji Zaveri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tribhovandas Bhimji 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 Tribhovandas Bhimji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tribhovandas Bhimji has no effect on the direction of Muthoot Finance i.e., Muthoot Finance and Tribhovandas Bhimji go up and down completely randomly.

Pair Corralation between Muthoot Finance and Tribhovandas Bhimji

Assuming the 90 days trading horizon Muthoot Finance Limited is expected to generate 0.4 times more return on investment than Tribhovandas Bhimji. However, Muthoot Finance Limited is 2.52 times less risky than Tribhovandas Bhimji. It trades about 0.27 of its potential returns per unit of risk. Tribhovandas Bhimji Zaveri is currently generating about 0.04 per unit of risk. If you would invest  191,195  in Muthoot Finance Limited on September 29, 2024 and sell it today you would earn a total of  15,765  from holding Muthoot Finance Limited or generate 8.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.3%
Values	Daily Returns

Muthoot Finance Limited  vs.  Tribhovandas Bhimji Zaveri

Muthoot Finance

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Muthoot Finance Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Muthoot Finance is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Tribhovandas Bhimji

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tribhovandas Bhimji Zaveri has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Muthoot Finance and Tribhovandas Bhimji

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

The idea behind Muthoot Finance Limited and Tribhovandas Bhimji Zaveri 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.