Correlation Between Bharti Airtel and Max Financial

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

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

Diversification Opportunities for Bharti Airtel and Max Financial

-0.02

Correlation Coefficient

Bharti Airtel  Max Financial

Good diversification

The 3 months correlation between Bharti and Max is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Bharti Airtel Limited and Max Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Max Financial Services and Bharti Airtel 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 Bharti Airtel Limited are associated (or correlated) with Max Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Max Financial Services has no effect on the direction of Bharti Airtel i.e., Bharti Airtel and Max Financial go up and down completely randomly.

Pair Corralation between Bharti Airtel and Max Financial

Assuming the 90 days trading horizon Bharti Airtel Limited is expected to generate 1.12 times more return on investment than Max Financial. However, Bharti Airtel is 1.12 times more volatile than Max Financial Services. It trades about 0.01 of its potential returns per unit of risk. Max Financial Services is currently generating about -0.15 per unit of risk. If you would invest  157,875  in Bharti Airtel Limited on September 24, 2024 and sell it today you would lose (65.00) from holding Bharti Airtel Limited or give up 0.04% of portfolio value over 90 days.

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

Bharti Airtel Limited  vs.  Max Financial Services

Bharti Airtel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bharti Airtel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Max Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Max Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Max Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bharti Airtel and Max Financial

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

The idea behind Bharti Airtel Limited and Max 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.