Correlation Between Tamilnad Mercantile and MAS Financial

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

By analyzing existing cross correlation between Tamilnad Mercantile Bank and MAS Financial Services, you can compare the effects of market volatilities on Tamilnad Mercantile and MAS Financial 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 Tamilnad Mercantile with a short position of MAS Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tamilnad Mercantile and MAS Financial.

Diversification Opportunities for Tamilnad Mercantile and MAS Financial

0.86

Correlation Coefficient

Tamilnad Mercantile  MAS Financial

Very poor diversification

The 3 months correlation between Tamilnad and MAS is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Tamilnad Mercantile Bank and MAS Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAS Financial Services and Tamilnad Mercantile 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 Tamilnad Mercantile Bank are associated (or correlated) with MAS Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAS Financial Services has no effect on the direction of Tamilnad Mercantile i.e., Tamilnad Mercantile and MAS Financial go up and down completely randomly.

Pair Corralation between Tamilnad Mercantile and MAS Financial

Assuming the 90 days trading horizon Tamilnad Mercantile Bank is expected to generate 0.64 times more return on investment than MAS Financial. However, Tamilnad Mercantile Bank is 1.57 times less risky than MAS Financial. It trades about -0.21 of its potential returns per unit of risk. MAS Financial Services is currently generating about -0.13 per unit of risk. If you would invest  47,690  in Tamilnad Mercantile Bank on December 1, 2024 and sell it today you would lose (6,775) from holding Tamilnad Mercantile Bank or give up 14.21% of portfolio value over 90 days.

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

Tamilnad Mercantile Bank  vs.  MAS Financial Services

Tamilnad Mercantile Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tamilnad Mercantile Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

MAS Financial Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days MAS Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tamilnad Mercantile and MAS Financial

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

The idea behind Tamilnad Mercantile Bank and MAS Financial Services 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.