Correlation Between Ortel Communications and Muthoot Finance

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

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

Diversification Opportunities for Ortel Communications and Muthoot Finance

-0.23

Correlation Coefficient

Ortel Communications  Muthoot Finance

Very good diversification

The 3 months correlation between Ortel and Muthoot is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ortel Communications Limited and Muthoot Finance Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muthoot Finance and Ortel Communications 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 Ortel Communications Limited are associated (or correlated) with Muthoot Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muthoot Finance has no effect on the direction of Ortel Communications i.e., Ortel Communications and Muthoot Finance go up and down completely randomly.

Pair Corralation between Ortel Communications and Muthoot Finance

Assuming the 90 days trading horizon Ortel Communications Limited is expected to under-perform the Muthoot Finance. In addition to that, Ortel Communications is 1.57 times more volatile than Muthoot Finance Limited. It trades about -0.06 of its total potential returns per unit of risk. Muthoot Finance Limited is currently generating about 0.0 per unit of volatility. If you would invest  195,800  in Muthoot Finance Limited on September 4, 2024 and sell it today you would lose (2,245) from holding Muthoot Finance Limited or give up 1.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Ortel Communications Limited  vs.  Muthoot Finance Limited

Ortel Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ortel Communications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Muthoot Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Muthoot Finance Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Muthoot Finance is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ortel Communications and Muthoot Finance

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

The idea behind Ortel Communications Limited and Muthoot Finance 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .