Correlation Between ZF Commercial and Bank of Maharashtra

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

By analyzing existing cross correlation between ZF Commercial Vehicle and Bank of Maharashtra, you can compare the effects of market volatilities on ZF Commercial and Bank of Maharashtra 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 ZF Commercial with a short position of Bank of Maharashtra. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZF Commercial and Bank of Maharashtra.

Diversification Opportunities for ZF Commercial and Bank of Maharashtra

-0.12

Correlation Coefficient

ZF Commercial  Bank of Maharashtra

Good diversification

The 3 months correlation between ZFCVINDIA and Bank is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding ZF Commercial Vehicle and Bank of Maharashtra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Maharashtra and ZF Commercial 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 ZF Commercial Vehicle are associated (or correlated) with Bank of Maharashtra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Maharashtra has no effect on the direction of ZF Commercial i.e., ZF Commercial and Bank of Maharashtra go up and down completely randomly.

Pair Corralation between ZF Commercial and Bank of Maharashtra

Assuming the 90 days trading horizon ZF Commercial is expected to generate 2.13 times less return on investment than Bank of Maharashtra. But when comparing it to its historical volatility, ZF Commercial Vehicle is 1.17 times less risky than Bank of Maharashtra. It trades about 0.03 of its potential returns per unit of risk. Bank of Maharashtra is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,835  in Bank of Maharashtra on October 10, 2024 and sell it today you would earn a total of  2,290  from holding Bank of Maharashtra or generate 80.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.39%
Values	Daily Returns

ZF Commercial Vehicle  vs.  Bank of Maharashtra

ZF Commercial Vehicle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZF Commercial Vehicle 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 fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bank of Maharashtra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of Maharashtra has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Bank of Maharashtra is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ZF Commercial and Bank of Maharashtra

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

The idea behind ZF Commercial Vehicle and Bank of Maharashtra 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.