Correlation Between Vats Liquor and HMTNew Technical

Can any of the company-specific risk be diversified away by investing in both Vats Liquor and HMTNew Technical 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 Vats Liquor and HMTNew Technical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vats Liquor Chain and HMTNew Technical, you can compare the effects of market volatilities on Vats Liquor and HMTNew Technical 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 Vats Liquor with a short position of HMTNew Technical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vats Liquor and HMTNew Technical.

Diversification Opportunities for Vats Liquor and HMTNew Technical

0.44

Correlation Coefficient

Vats Liquor  HMTNew Technical

Very weak diversification

The 3 months correlation between Vats and HMTNew is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Vats Liquor Chain and HMTNew Technical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMTNew Technical and Vats Liquor 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 Vats Liquor Chain are associated (or correlated) with HMTNew Technical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMTNew Technical has no effect on the direction of Vats Liquor i.e., Vats Liquor and HMTNew Technical go up and down completely randomly.

Pair Corralation between Vats Liquor and HMTNew Technical

Assuming the 90 days trading horizon Vats Liquor Chain is expected to under-perform the HMTNew Technical. But the stock apears to be less risky and, when comparing its historical volatility, Vats Liquor Chain is 1.08 times less risky than HMTNew Technical. The stock trades about -0.05 of its potential returns per unit of risk. The HMTNew Technical is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,941  in HMTNew Technical on October 6, 2024 and sell it today you would earn a total of  62.00  from holding HMTNew Technical or generate 2.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.73%
Values	Daily Returns

Vats Liquor Chain  vs.  HMTNew Technical

Vats Liquor Chain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vats Liquor Chain has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

HMTNew Technical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HMTNew Technical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HMTNew Technical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vats Liquor and HMTNew Technical

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

The idea behind Vats Liquor Chain and HMTNew Technical 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.