Correlation Between Maithan Alloys and Fine Organic

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

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

Diversification Opportunities for Maithan Alloys and Fine Organic

0.66

Correlation Coefficient

Maithan Alloys  Fine Organic

Poor diversification

The 3 months correlation between Maithan and Fine is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Maithan Alloys Limited and Fine Organic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fine Organic Industries and Maithan Alloys 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 Maithan Alloys Limited are associated (or correlated) with Fine Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fine Organic Industries has no effect on the direction of Maithan Alloys i.e., Maithan Alloys and Fine Organic go up and down completely randomly.

Pair Corralation between Maithan Alloys and Fine Organic

Assuming the 90 days trading horizon Maithan Alloys Limited is expected to under-perform the Fine Organic. But the stock apears to be less risky and, when comparing its historical volatility, Maithan Alloys Limited is 1.19 times less risky than Fine Organic. The stock trades about -0.03 of its potential returns per unit of risk. The Fine Organic Industries is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  540,315  in Fine Organic Industries on September 3, 2024 and sell it today you would lose (20,525) from holding Fine Organic Industries or give up 3.8% of portfolio value over 90 days.

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

Maithan Alloys Limited  vs.  Fine Organic Industries

Maithan Alloys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maithan Alloys Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Maithan Alloys is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Fine Organic Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fine Organic Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fine Organic is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Maithan Alloys and Fine Organic

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

The idea behind Maithan Alloys Limited and Fine Organic Industries 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.