Correlation Between Bank of Maharashtra and MAS Financial

Can any of the company-specific risk be diversified away by investing in both Bank of Maharashtra and MAS 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 Bank of Maharashtra and MAS Financial 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 MAS Financial Services, you can compare the effects of market volatilities on Bank of Maharashtra and MAS 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 Bank of Maharashtra with a short position of MAS Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Maharashtra and MAS Financial.

Diversification Opportunities for Bank of Maharashtra and MAS Financial

0.04

Correlation Coefficient

Bank of Maharashtra  MAS Financial

Significant diversification

The 3 months correlation between Bank and MAS is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Maharashtra and MAS Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAS Financial Services 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 MAS Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAS Financial Services has no effect on the direction of Bank of Maharashtra i.e., Bank of Maharashtra and MAS Financial go up and down completely randomly.

Pair Corralation between Bank of Maharashtra and MAS Financial

Assuming the 90 days trading horizon Bank of Maharashtra is expected to generate 1.76 times less return on investment than MAS Financial. But when comparing it to its historical volatility, Bank of Maharashtra is 3.61 times less risky than MAS Financial. It trades about 0.06 of its potential returns per unit of risk. MAS Financial Services is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  28,565  in MAS Financial Services on September 4, 2024 and sell it today you would lose (1,025) from holding MAS Financial Services or give up 3.59% of portfolio value over 90 days.

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

Bank of Maharashtra  vs.  MAS Financial Services

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.

MAS Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAS Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, MAS Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank of Maharashtra and MAS Financial

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

The idea behind Bank of Maharashtra and MAS 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.