Correlation Between Sapphire Foods and Maharashtra Scooters

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

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

Diversification Opportunities for Sapphire Foods and Maharashtra Scooters

0.68

Correlation Coefficient

Sapphire Foods  Maharashtra Scooters

Poor diversification

The 3 months correlation between Sapphire and Maharashtra is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sapphire Foods India and Maharashtra Scooters Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maharashtra Scooters and Sapphire Foods 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 Sapphire Foods India 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 Sapphire Foods i.e., Sapphire Foods and Maharashtra Scooters go up and down completely randomly.

Pair Corralation between Sapphire Foods and Maharashtra Scooters

Assuming the 90 days trading horizon Sapphire Foods India is expected to generate 0.76 times more return on investment than Maharashtra Scooters. However, Sapphire Foods India is 1.31 times less risky than Maharashtra Scooters. It trades about -0.01 of its potential returns per unit of risk. Maharashtra Scooters Limited is currently generating about -0.06 per unit of risk. If you would invest  32,825  in Sapphire Foods India on September 14, 2024 and sell it today you would lose (840.00) from holding Sapphire Foods India or give up 2.56% of portfolio value over 90 days.

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

Sapphire Foods India  vs.  Maharashtra Scooters Limited

Sapphire Foods India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapphire Foods India has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Sapphire Foods is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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 latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Sapphire Foods and Maharashtra Scooters

The main advantage of trading using opposite Sapphire Foods and Maharashtra Scooters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sapphire Foods 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 Sapphire Foods India 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.