Correlation Between Power Mech and Maharashtra Scooters

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

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

Diversification Opportunities for Power Mech and Maharashtra Scooters

0.76

Correlation Coefficient

Power Mech  Maharashtra Scooters

Poor diversification

The 3 months correlation between Power and Maharashtra is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Power Mech Projects and Maharashtra Scooters Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maharashtra Scooters and Power Mech 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 Mech Projects are associated (or correlated) with Maharashtra Scooters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maharashtra Scooters has no effect on the direction of Power Mech i.e., Power Mech and Maharashtra Scooters go up and down completely randomly.

Pair Corralation between Power Mech and Maharashtra Scooters

Assuming the 90 days trading horizon Power Mech Projects is expected to generate 3.31 times more return on investment than Maharashtra Scooters. However, Power Mech is 3.31 times more volatile than Maharashtra Scooters Limited. It trades about 0.06 of its potential returns per unit of risk. Maharashtra Scooters Limited is currently generating about 0.1 per unit of risk. If you would invest  109,020  in Power Mech Projects on October 13, 2024 and sell it today you would earn a total of  165,790  from holding Power Mech Projects or generate 152.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.59%
Values	Daily Returns

Power Mech Projects  vs.  Maharashtra Scooters Limited

Power Mech Projects

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Mech Projects has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting 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.

Maharashtra Scooters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maharashtra Scooters Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Power Mech and Maharashtra Scooters

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

The idea behind Power Mech Projects and Maharashtra Scooters 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..