Correlation Between NIFTY SUMER and Maharashtra Seamless

Can any of the company-specific risk be diversified away by investing in both NIFTY SUMER and Maharashtra Seamless 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 NIFTY SUMER and Maharashtra Seamless into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NIFTY SUMER DURABLES and Maharashtra Seamless Limited, you can compare the effects of market volatilities on NIFTY SUMER and Maharashtra Seamless 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 NIFTY SUMER with a short position of Maharashtra Seamless. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIFTY SUMER and Maharashtra Seamless.

Diversification Opportunities for NIFTY SUMER and Maharashtra Seamless

0.37

Correlation Coefficient

NIFTY SUMER  Maharashtra Seamless

Weak diversification

The 3 months correlation between NIFTY and Maharashtra is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding NIFTY SUMER DURABLES and Maharashtra Seamless Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maharashtra Seamless and NIFTY SUMER 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 NIFTY SUMER DURABLES are associated (or correlated) with Maharashtra Seamless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maharashtra Seamless has no effect on the direction of NIFTY SUMER i.e., NIFTY SUMER and Maharashtra Seamless go up and down completely randomly.

Pair Corralation between NIFTY SUMER and Maharashtra Seamless

Assuming the 90 days trading horizon NIFTY SUMER DURABLES is expected to generate 0.4 times more return on investment than Maharashtra Seamless. However, NIFTY SUMER DURABLES is 2.5 times less risky than Maharashtra Seamless. It trades about 0.13 of its potential returns per unit of risk. Maharashtra Seamless Limited is currently generating about -0.04 per unit of risk. If you would invest  3,038,700  in NIFTY SUMER DURABLES on October 3, 2024 and sell it today you would earn a total of  1,141,880  from holding NIFTY SUMER DURABLES or generate 37.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.24%
Values	Daily Returns

NIFTY SUMER DURABLES  vs.  Maharashtra Seamless Limited

Pair Trading with NIFTY SUMER and Maharashtra Seamless

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

The idea behind NIFTY SUMER DURABLES and Maharashtra Seamless 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.