Correlation Between Max Financial and CSB Bank

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

Diversification Opportunities for Max Financial and CSB Bank

0.7

Correlation Coefficient

Max Financial  CSB Bank

Poor diversification

The 3 months correlation between Max and CSB is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Max Financial Services and CSB Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSB Bank Limited 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 CSB Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSB Bank Limited has no effect on the direction of Max Financial i.e., Max Financial and CSB Bank go up and down completely randomly.

Pair Corralation between Max Financial and CSB Bank

Assuming the 90 days trading horizon Max Financial is expected to generate 1.16 times less return on investment than CSB Bank. But when comparing it to its historical volatility, Max Financial Services is 1.12 times less risky than CSB Bank. It trades about 0.2 of its potential returns per unit of risk. CSB Bank Limited is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  35,020  in CSB Bank Limited on May 3, 2025 and sell it today you would earn a total of  7,000  from holding CSB Bank Limited or generate 19.99% return on investment over 90 days.

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

Max Financial Services  vs.  CSB Bank Limited

Max Financial Services

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Max Financial Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Max Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

CSB Bank Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CSB Bank Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, CSB Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Max Financial and CSB Bank

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

The idea behind Max Financial Services and CSB Bank 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.