Correlation Between Maharashtra Scooters and NCC

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

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

Diversification Opportunities for Maharashtra Scooters and NCC

0.11

Correlation Coefficient

Maharashtra Scooters  NCC

Average diversification

The 3 months correlation between Maharashtra and NCC is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Maharashtra Scooters Limited and NCC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCC Limited and Maharashtra Scooters 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 Maharashtra Scooters Limited are associated (or correlated) with NCC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCC Limited has no effect on the direction of Maharashtra Scooters i.e., Maharashtra Scooters and NCC go up and down completely randomly.

Pair Corralation between Maharashtra Scooters and NCC

Assuming the 90 days trading horizon Maharashtra Scooters Limited is expected to under-perform the NCC. In addition to that, Maharashtra Scooters is 1.32 times more volatile than NCC Limited. It trades about -0.12 of its total potential returns per unit of risk. NCC Limited is currently generating about -0.06 per unit of volatility. If you would invest  31,525  in NCC Limited on September 23, 2024 and sell it today you would lose (2,770) from holding NCC Limited or give up 8.79% of portfolio value over 90 days.

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

Maharashtra Scooters Limited  vs.  NCC Limited

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 unsteady 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.

NCC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NCC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Maharashtra Scooters and NCC

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

The idea behind Maharashtra Scooters Limited and NCC 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.