Correlation Between Power Finance and Muthoot Finance

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Can any of the company-specific risk be diversified away by investing in both Power Finance and Muthoot Finance 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 Power Finance and Muthoot Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Finance and Muthoot Finance Limited, you can compare the effects of market volatilities on Power Finance and Muthoot Finance 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 Power Finance with a short position of Muthoot Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Finance and Muthoot Finance.

Diversification Opportunities for Power Finance and Muthoot Finance

PowerMuthootDiversified AwayPowerMuthootDiversified Away100%
-0.32
  Correlation Coefficient

Very good diversification

The 3 months correlation between Power and Muthoot is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Power Finance and Muthoot Finance Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muthoot Finance and Power 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 Power Finance are associated (or correlated) with Muthoot Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muthoot Finance has no effect on the direction of Power Finance i.e., Power Finance and Muthoot Finance go up and down completely randomly.

Pair Corralation between Power Finance and Muthoot Finance

Assuming the 90 days trading horizon Power Finance is expected to under-perform the Muthoot Finance. In addition to that, Power Finance is 1.47 times more volatile than Muthoot Finance Limited. It trades about -0.05 of its total potential returns per unit of risk. Muthoot Finance Limited is currently generating about 0.12 per unit of volatility. If you would invest  192,610  in Muthoot Finance Limited on October 27, 2024 and sell it today you would earn a total of  24,730  from holding Muthoot Finance Limited or generate 12.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Power Finance  vs.  Muthoot Finance Limited

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -10-5051015
JavaScript chart by amCharts 3.21.15PFC MUTHOOTFIN
       Timeline  
Power Finance 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Power Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan400420440460480500520
Muthoot Finance 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Muthoot Finance Limited are ranked lower than 9 (%) 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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan1,8001,9002,0002,1002,200

Power Finance and Muthoot Finance Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.11-3.08-2.05-1.01-0.01670.951.952.953.954.95 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15PFC MUTHOOTFIN
       Returns  

Pair Trading with Power Finance and Muthoot Finance

The main advantage of trading using opposite Power Finance and Muthoot Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Finance position performs unexpectedly, Muthoot Finance 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 Muthoot Finance will offset losses from the drop in Muthoot Finance's long position.
The idea behind Power Finance and Muthoot Finance 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.
Check out your portfolio center.
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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