Correlation Between Bank of Maharashtra and Hindware Home

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

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

Diversification Opportunities for Bank of Maharashtra and Hindware Home

0.76

Correlation Coefficient

Bank of Maharashtra  Hindware Home

Poor diversification

The 3 months correlation between Bank and Hindware is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Maharashtra and Hindware Home Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindware Home Innovation and Bank of Maharashtra 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 Bank of Maharashtra are associated (or correlated) with Hindware Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindware Home Innovation has no effect on the direction of Bank of Maharashtra i.e., Bank of Maharashtra and Hindware Home go up and down completely randomly.

Pair Corralation between Bank of Maharashtra and Hindware Home

Assuming the 90 days trading horizon Bank of Maharashtra is expected to generate 0.71 times more return on investment than Hindware Home. However, Bank of Maharashtra is 1.41 times less risky than Hindware Home. It trades about 0.12 of its potential returns per unit of risk. Hindware Home Innovation is currently generating about -0.03 per unit of risk. If you would invest  5,440  in Bank of Maharashtra on September 4, 2024 and sell it today you would earn a total of  256.00  from holding Bank of Maharashtra or generate 4.71% return on investment over 90 days.

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

Bank of Maharashtra  vs.  Hindware Home Innovation

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.

Hindware Home Innovation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindware Home Innovation has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Bank of Maharashtra and Hindware Home

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

The idea behind Bank of Maharashtra and Hindware Home Innovation 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.