Correlation Between Shaily Engineering and Maithan Alloys

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

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

Diversification Opportunities for Shaily Engineering and Maithan Alloys

0.52

Correlation Coefficient

Shaily Engineering  Maithan Alloys

Very weak diversification

The 3 months correlation between Shaily and Maithan is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Shaily Engineering Plastics and Maithan Alloys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maithan Alloys and Shaily Engineering 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 Shaily Engineering Plastics are associated (or correlated) with Maithan Alloys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maithan Alloys has no effect on the direction of Shaily Engineering i.e., Shaily Engineering and Maithan Alloys go up and down completely randomly.

Pair Corralation between Shaily Engineering and Maithan Alloys

Assuming the 90 days trading horizon Shaily Engineering Plastics is expected to generate 1.85 times more return on investment than Maithan Alloys. However, Shaily Engineering is 1.85 times more volatile than Maithan Alloys Limited. It trades about 0.15 of its potential returns per unit of risk. Maithan Alloys Limited is currently generating about -0.01 per unit of risk. If you would invest  106,995  in Shaily Engineering Plastics on September 26, 2024 and sell it today you would earn a total of  40,050  from holding Shaily Engineering Plastics or generate 37.43% return on investment over 90 days.

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

Shaily Engineering Plastics  vs.  Maithan Alloys Limited

Shaily Engineering

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shaily Engineering Plastics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Shaily Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

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 newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Shaily Engineering and Maithan Alloys

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

The idea behind Shaily Engineering Plastics and Maithan Alloys 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..