Correlation Between Max Financial and V Mart

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

Diversification Opportunities for Max Financial and V Mart

0.36

Correlation Coefficient

Max Financial  V Mart

Weak diversification

The 3 months correlation between Max and VMART is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Max Financial Services and V Mart Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on V Mart Retail 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 V Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of V Mart Retail has no effect on the direction of Max Financial i.e., Max Financial and V Mart go up and down completely randomly.

Pair Corralation between Max Financial and V Mart

Assuming the 90 days trading horizon Max Financial Services is expected to generate 0.94 times more return on investment than V Mart. However, Max Financial Services is 1.06 times less risky than V Mart. It trades about 0.06 of its potential returns per unit of risk. V Mart Retail Limited is currently generating about 0.04 per unit of risk. If you would invest  71,385  in Max Financial Services on September 25, 2024 and sell it today you would earn a total of  38,685  from holding Max Financial Services or generate 54.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

Max Financial Services  vs.  V Mart Retail Limited

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

V Mart Retail

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Max Financial and V Mart

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

The idea behind Max Financial Services and V Mart Retail 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.