Correlation Between Dhunseri Investments and Maithan Alloys

Can any of the company-specific risk be diversified away by investing in both Dhunseri Investments and Maithan Alloys 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 Dhunseri Investments and Maithan Alloys into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dhunseri Investments Limited and Maithan Alloys Limited, you can compare the effects of market volatilities on Dhunseri Investments and Maithan Alloys 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 Dhunseri Investments with a short position of Maithan Alloys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dhunseri Investments and Maithan Alloys.

Diversification Opportunities for Dhunseri Investments and Maithan Alloys

0.2

Correlation Coefficient

Dhunseri Investments  Maithan Alloys

Modest diversification

The 3 months correlation between Dhunseri and Maithan is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Dhunseri Investments Limited and Maithan Alloys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maithan Alloys and Dhunseri Investments 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 Dhunseri Investments Limited are associated (or correlated) with Maithan Alloys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maithan Alloys has no effect on the direction of Dhunseri Investments i.e., Dhunseri Investments and Maithan Alloys go up and down completely randomly.

Pair Corralation between Dhunseri Investments and Maithan Alloys

Assuming the 90 days trading horizon Dhunseri Investments Limited is expected to under-perform the Maithan Alloys. In addition to that, Dhunseri Investments is 1.57 times more volatile than Maithan Alloys Limited. It trades about -0.07 of its total potential returns per unit of risk. Maithan Alloys Limited is currently generating about -0.02 per unit of volatility. If you would invest  115,805  in Maithan Alloys Limited on September 28, 2024 and sell it today you would lose (4,470) from holding Maithan Alloys Limited or give up 3.86% of portfolio value over 90 days.

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

Dhunseri Investments Limited  vs.  Maithan Alloys Limited

Dhunseri Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dhunseri Investments Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Maithan Alloys

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dhunseri Investments and Maithan Alloys

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

The idea behind Dhunseri Investments Limited and Maithan Alloys 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.