Correlation Between Allied Blenders and HEG

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

By analyzing existing cross correlation between Allied Blenders Distillers and HEG Limited, you can compare the effects of market volatilities on Allied Blenders and HEG 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 Allied Blenders with a short position of HEG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Blenders and HEG.

Diversification Opportunities for Allied Blenders and HEG

0.71

Correlation Coefficient

Allied Blenders  HEG

Poor diversification

The 3 months correlation between Allied and HEG is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Allied Blenders Distillers and HEG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEG Limited and Allied Blenders 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 Allied Blenders Distillers are associated (or correlated) with HEG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEG Limited has no effect on the direction of Allied Blenders i.e., Allied Blenders and HEG go up and down completely randomly.

Pair Corralation between Allied Blenders and HEG

Assuming the 90 days trading horizon Allied Blenders is expected to generate 124.81 times less return on investment than HEG. But when comparing it to its historical volatility, Allied Blenders Distillers is 71.87 times less risky than HEG. It trades about 0.11 of its potential returns per unit of risk. HEG Limited is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  34,915  in HEG Limited on October 9, 2024 and sell it today you would earn a total of  14,200  from holding HEG Limited or generate 40.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	51.59%
Values	Daily Returns

Allied Blenders Distillers  vs.  HEG Limited

Allied Blenders Dist

Risk-Adjusted Performance

15 of 100

Good

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

HEG Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HEG Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, HEG is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Allied Blenders and HEG

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

The idea behind Allied Blenders Distillers and HEG 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.