Correlation Between Gujarat Fluorochemicals and Maharashtra Scooters

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

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

Diversification Opportunities for Gujarat Fluorochemicals and Maharashtra Scooters

0.46

Correlation Coefficient

Gujarat Fluorochemicals  Maharashtra Scooters

Very weak diversification

The 3 months correlation between Gujarat and Maharashtra is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Fluorochemicals Limite and Maharashtra Scooters Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maharashtra Scooters and Gujarat Fluorochemicals 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 Gujarat Fluorochemicals Limited are associated (or correlated) with Maharashtra Scooters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maharashtra Scooters has no effect on the direction of Gujarat Fluorochemicals i.e., Gujarat Fluorochemicals and Maharashtra Scooters go up and down completely randomly.

Pair Corralation between Gujarat Fluorochemicals and Maharashtra Scooters

Assuming the 90 days trading horizon Gujarat Fluorochemicals is expected to generate 1.93 times less return on investment than Maharashtra Scooters. In addition to that, Gujarat Fluorochemicals is 1.2 times more volatile than Maharashtra Scooters Limited. It trades about 0.04 of its total potential returns per unit of risk. Maharashtra Scooters Limited is currently generating about 0.1 per unit of volatility. If you would invest  442,057  in Maharashtra Scooters Limited on September 20, 2024 and sell it today you would earn a total of  524,103  from holding Maharashtra Scooters Limited or generate 118.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Gujarat Fluorochemicals Limite  vs.  Maharashtra Scooters Limited

Gujarat Fluorochemicals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Fluorochemicals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Gujarat Fluorochemicals is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Maharashtra Scooters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maharashtra Scooters Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Gujarat Fluorochemicals and Maharashtra Scooters

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

The idea behind Gujarat Fluorochemicals Limited and Maharashtra Scooters 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.

Check out your portfolio center.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.