Correlation Between Associated Alcohols and HEG

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

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

Diversification Opportunities for Associated Alcohols and HEG

0.85

Correlation Coefficient

Associated Alcohols  HEG

Very poor diversification

The 3 months correlation between Associated and HEG is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Associated Alcohols Breweries and HEG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEG Limited and Associated Alcohols 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 Associated Alcohols Breweries 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 Associated Alcohols i.e., Associated Alcohols and HEG go up and down completely randomly.

Pair Corralation between Associated Alcohols and HEG

Assuming the 90 days trading horizon Associated Alcohols is expected to generate 16.46 times less return on investment than HEG. But when comparing it to its historical volatility, Associated Alcohols Breweries is 30.91 times less risky than HEG. It trades about 0.16 of its potential returns per unit of risk. HEG Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  40,732  in HEG Limited on September 25, 2024 and sell it today you would earn a total of  12,363  from holding HEG Limited or generate 30.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Associated Alcohols Breweries  vs.  HEG Limited

Associated Alcohols

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Associated Alcohols reported solid returns over the last few months and may actually be approaching a breakup point.

HEG Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HEG Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, HEG exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Associated Alcohols and HEG

The main advantage of trading using opposite Associated Alcohols and HEG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated Alcohols 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 Associated Alcohols Breweries 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..