Correlation Between NYSE Composite and Mahindra Mahindra

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

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

Diversification Opportunities for NYSE Composite and Mahindra Mahindra

-0.15

Correlation Coefficient

NYSE Composite  Mahindra Mahindra

Good diversification

The 3 months correlation between NYSE and Mahindra is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Mahindra Mahindra Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mahindra Mahindra and NYSE Composite 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 NYSE Composite are associated (or correlated) with Mahindra Mahindra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mahindra Mahindra has no effect on the direction of NYSE Composite i.e., NYSE Composite and Mahindra Mahindra go up and down completely randomly.

Pair Corralation between NYSE Composite and Mahindra Mahindra

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.23 times more return on investment than Mahindra Mahindra. However, NYSE Composite is 4.29 times less risky than Mahindra Mahindra. It trades about 0.03 of its potential returns per unit of risk. Mahindra Mahindra Limited is currently generating about -0.05 per unit of risk. If you would invest  1,920,711  in NYSE Composite on December 21, 2024 and sell it today you would earn a total of  24,719  from holding NYSE Composite or generate 1.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.33%
Values	Daily Returns

NYSE Composite  vs.  Mahindra Mahindra Limited

Pair Trading with NYSE Composite and Mahindra Mahindra

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

The idea behind NYSE Composite and Mahindra Mahindra 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.