Correlation Between Elgi Rubber and Max Financial

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

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

Diversification Opportunities for Elgi Rubber and Max Financial

-0.1

Correlation Coefficient

Elgi Rubber  Max Financial

Good diversification

The 3 months correlation between Elgi and Max is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Elgi Rubber 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 Elgi Rubber 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 Elgi Rubber 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 Elgi Rubber i.e., Elgi Rubber and Max Financial go up and down completely randomly.

Pair Corralation between Elgi Rubber and Max Financial

Assuming the 90 days trading horizon Elgi Rubber is expected to generate 2.46 times more return on investment than Max Financial. However, Elgi Rubber is 2.46 times more volatile than Max Financial Services. It trades about 0.1 of its potential returns per unit of risk. Max Financial Services is currently generating about 0.03 per unit of risk. If you would invest  10,371  in Elgi Rubber on September 11, 2024 and sell it today you would earn a total of  2,546  from holding Elgi Rubber or generate 24.55% return on investment over 90 days.

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

Elgi Rubber  vs.  Max Financial Services

Elgi Rubber

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elgi Rubber are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Elgi Rubber sustained solid returns over the last few months and may actually be approaching a breakup point.

Max Financial Services

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Max Financial Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Elgi Rubber and Max Financial

The main advantage of trading using opposite Elgi Rubber and Max Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elgi Rubber 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 Elgi Rubber 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.