Correlation Between Bawany Air and Hi Tech

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

By analyzing existing cross correlation between Bawany Air Products and Hi Tech Lubricants, you can compare the effects of market volatilities on Bawany Air and Hi Tech 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 Bawany Air with a short position of Hi Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bawany Air and Hi Tech.

Diversification Opportunities for Bawany Air and Hi Tech

0.8

Correlation Coefficient

Bawany Air  Hi Tech

Very poor diversification

The 3 months correlation between Bawany and HTL is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bawany Air Products and Hi Tech Lubricants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Tech Lubricants and Bawany Air 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 Bawany Air Products are associated (or correlated) with Hi Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Tech Lubricants has no effect on the direction of Bawany Air i.e., Bawany Air and Hi Tech go up and down completely randomly.

Pair Corralation between Bawany Air and Hi Tech

Assuming the 90 days trading horizon Bawany Air Products is expected to under-perform the Hi Tech. In addition to that, Bawany Air is 1.38 times more volatile than Hi Tech Lubricants. It trades about -0.17 of its total potential returns per unit of risk. Hi Tech Lubricants is currently generating about -0.08 per unit of volatility. If you would invest  5,325  in Hi Tech Lubricants on December 21, 2024 and sell it today you would lose (724.00) from holding Hi Tech Lubricants or give up 13.6% of portfolio value over 90 days.

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

Bawany Air Products  vs.  Hi Tech Lubricants

Bawany Air Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bawany Air Products 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hi Tech Lubricants

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hi Tech Lubricants has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Bawany Air and Hi Tech

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

The idea behind Bawany Air Products and Hi Tech Lubricants 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .