Correlation Between Max Financial and Southern Petrochemicals

Can any of the company-specific risk be diversified away by investing in both Max Financial and Southern Petrochemicals 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 Southern Petrochemicals 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 Southern Petrochemicals Industries, you can compare the effects of market volatilities on Max Financial and Southern Petrochemicals 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 Southern Petrochemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Max Financial and Southern Petrochemicals.

Diversification Opportunities for Max Financial and Southern Petrochemicals

-0.17

Correlation Coefficient

Max Financial  Southern Petrochemicals

Good diversification

The 3 months correlation between Max and Southern is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Max Financial Services and Southern Petrochemicals Indust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Petrochemicals 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 Southern Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Petrochemicals has no effect on the direction of Max Financial i.e., Max Financial and Southern Petrochemicals go up and down completely randomly.

Pair Corralation between Max Financial and Southern Petrochemicals

Assuming the 90 days trading horizon Max Financial Services is expected to under-perform the Southern Petrochemicals. In addition to that, Max Financial is 1.06 times more volatile than Southern Petrochemicals Industries. It trades about -0.11 of its total potential returns per unit of risk. Southern Petrochemicals Industries is currently generating about 0.21 per unit of volatility. If you would invest  7,271  in Southern Petrochemicals Industries on September 20, 2024 and sell it today you would earn a total of  503.00  from holding Southern Petrochemicals Industries or generate 6.92% return on investment over 90 days.

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

Max Financial Services  vs.  Southern Petrochemicals Indust

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 comparatively stable basic indicators, Max Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Southern Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Petrochemicals Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Southern Petrochemicals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Max Financial and Southern Petrochemicals

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

The idea behind Max Financial Services and Southern Petrochemicals 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.