Correlation Between Indian Metals and Bank of Maharashtra

Can any of the company-specific risk be diversified away by investing in both Indian Metals and Bank of Maharashtra 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 Indian Metals and Bank of Maharashtra into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indian Metals Ferro and Bank of Maharashtra, you can compare the effects of market volatilities on Indian Metals and Bank of Maharashtra 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 Indian Metals with a short position of Bank of Maharashtra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Metals and Bank of Maharashtra.

Diversification Opportunities for Indian Metals and Bank of Maharashtra

0.86

Correlation Coefficient

Indian Metals  Bank of Maharashtra

Very poor diversification

The 3 months correlation between Indian and Bank is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and Bank of Maharashtra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Maharashtra and Indian Metals 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 Indian Metals Ferro are associated (or correlated) with Bank of Maharashtra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Maharashtra has no effect on the direction of Indian Metals i.e., Indian Metals and Bank of Maharashtra go up and down completely randomly.

Pair Corralation between Indian Metals and Bank of Maharashtra

Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 1.14 times more return on investment than Bank of Maharashtra. However, Indian Metals is 1.14 times more volatile than Bank of Maharashtra. It trades about 0.14 of its potential returns per unit of risk. Bank of Maharashtra is currently generating about 0.1 per unit of risk. If you would invest  63,320  in Indian Metals Ferro on April 25, 2025 and sell it today you would earn a total of  12,725  from holding Indian Metals Ferro or generate 20.1% return on investment over 90 days.

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

Indian Metals Ferro  vs.  Bank of Maharashtra

Indian Metals Ferro

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bank of Maharashtra

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Maharashtra are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Bank of Maharashtra displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indian Metals and Bank of Maharashtra

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

The idea behind Indian Metals Ferro and Bank of Maharashtra 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.