Correlation Between Parag Milk and Maithan Alloys

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

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

Diversification Opportunities for Parag Milk and Maithan Alloys

-0.26

Correlation Coefficient

Parag Milk  Maithan Alloys

Very good diversification

The 3 months correlation between Parag and Maithan is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Parag Milk Foods and Maithan Alloys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maithan Alloys and Parag Milk 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 Parag Milk Foods are associated (or correlated) with Maithan Alloys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maithan Alloys has no effect on the direction of Parag Milk i.e., Parag Milk and Maithan Alloys go up and down completely randomly.

Pair Corralation between Parag Milk and Maithan Alloys

Assuming the 90 days trading horizon Parag Milk Foods is expected to generate 1.43 times more return on investment than Maithan Alloys. However, Parag Milk is 1.43 times more volatile than Maithan Alloys Limited. It trades about 0.09 of its potential returns per unit of risk. Maithan Alloys Limited is currently generating about 0.08 per unit of risk. If you would invest  18,630  in Parag Milk Foods on September 12, 2024 and sell it today you would earn a total of  2,845  from holding Parag Milk Foods or generate 15.27% return on investment over 90 days.

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

Parag Milk Foods  vs.  Maithan Alloys Limited

Parag Milk Foods

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parag Milk Foods are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Parag Milk demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Maithan Alloys

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Maithan Alloys Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Maithan Alloys may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Parag Milk and Maithan Alloys

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

The idea behind Parag Milk Foods and Maithan Alloys 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.