Correlation Between Hota Industrial and Falcon Power

Can any of the company-specific risk be diversified away by investing in both Hota Industrial and Falcon Power 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 Hota Industrial and Falcon Power into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hota Industrial Mfg and Falcon Power Co, you can compare the effects of market volatilities on Hota Industrial and Falcon Power 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 Hota Industrial with a short position of Falcon Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hota Industrial and Falcon Power.

Diversification Opportunities for Hota Industrial and Falcon Power

-0.17

Correlation Coefficient

Hota Industrial  Falcon Power

Good diversification

The 3 months correlation between Hota and Falcon is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Hota Industrial Mfg and Falcon Power Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Power and Hota Industrial 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 Hota Industrial Mfg are associated (or correlated) with Falcon Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Power has no effect on the direction of Hota Industrial i.e., Hota Industrial and Falcon Power go up and down completely randomly.

Pair Corralation between Hota Industrial and Falcon Power

Assuming the 90 days trading horizon Hota Industrial Mfg is expected to generate 1.21 times more return on investment than Falcon Power. However, Hota Industrial is 1.21 times more volatile than Falcon Power Co. It trades about -0.13 of its potential returns per unit of risk. Falcon Power Co is currently generating about -0.15 per unit of risk. If you would invest  6,540  in Hota Industrial Mfg on October 24, 2024 and sell it today you would lose (550.00) from holding Hota Industrial Mfg or give up 8.41% of portfolio value over 90 days.

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

Hota Industrial Mfg  vs.  Falcon Power Co

Hota Industrial Mfg

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hota Industrial Mfg are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hota Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Falcon Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Power Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Hota Industrial and Falcon Power

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

The idea behind Hota Industrial Mfg and Falcon Power Co 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.