Correlation Between Max Financial and DMCC SPECIALITY

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

By analyzing existing cross correlation between Max Financial Services and DMCC SPECIALITY CHEMICALS, you can compare the effects of market volatilities on Max Financial and DMCC SPECIALITY 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 Max Financial with a short position of DMCC SPECIALITY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Max Financial and DMCC SPECIALITY.

Diversification Opportunities for Max Financial and DMCC SPECIALITY

-0.44

Correlation Coefficient

Max Financial  DMCC SPECIALITY

Very good diversification

The 3 months correlation between Max and DMCC is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Max Financial Services and DMCC SPECIALITY CHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DMCC SPECIALITY CHEMICALS and Max Financial 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 Max Financial Services are associated (or correlated) with DMCC SPECIALITY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DMCC SPECIALITY CHEMICALS has no effect on the direction of Max Financial i.e., Max Financial and DMCC SPECIALITY go up and down completely randomly.

Pair Corralation between Max Financial and DMCC SPECIALITY

Assuming the 90 days trading horizon Max Financial is expected to generate 1.95 times less return on investment than DMCC SPECIALITY. But when comparing it to its historical volatility, Max Financial Services is 1.58 times less risky than DMCC SPECIALITY. It trades about 0.06 of its potential returns per unit of risk. DMCC SPECIALITY CHEMICALS is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  31,406  in DMCC SPECIALITY CHEMICALS on September 22, 2024 and sell it today you would earn a total of  7,574  from holding DMCC SPECIALITY CHEMICALS or generate 24.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Max Financial Services  vs.  DMCC SPECIALITY CHEMICALS

Max Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Max Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

DMCC SPECIALITY CHEMICALS

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DMCC SPECIALITY CHEMICALS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DMCC SPECIALITY unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Max Financial and DMCC SPECIALITY

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

The idea behind Max Financial Services and DMCC SPECIALITY CHEMICALS 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.