Correlation Between Bharat Road and Hilton Metal

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

By analyzing existing cross correlation between Bharat Road Network and Hilton Metal Forging, you can compare the effects of market volatilities on Bharat Road and Hilton Metal 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 Bharat Road with a short position of Hilton Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bharat Road and Hilton Metal.

Diversification Opportunities for Bharat Road and Hilton Metal

0.65

Correlation Coefficient

Bharat Road  Hilton Metal

Poor diversification

The 3 months correlation between Bharat and Hilton is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bharat Road Network and Hilton Metal Forging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Metal Forging and Bharat Road 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 Bharat Road Network are associated (or correlated) with Hilton Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Metal Forging has no effect on the direction of Bharat Road i.e., Bharat Road and Hilton Metal go up and down completely randomly.

Pair Corralation between Bharat Road and Hilton Metal

Assuming the 90 days trading horizon Bharat Road is expected to generate 2.47 times less return on investment than Hilton Metal. But when comparing it to its historical volatility, Bharat Road Network is 1.4 times less risky than Hilton Metal. It trades about 0.2 of its potential returns per unit of risk. Hilton Metal Forging is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  8,173  in Hilton Metal Forging on September 25, 2024 and sell it today you would earn a total of  1,796  from holding Hilton Metal Forging or generate 21.97% return on investment over 90 days.

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

Bharat Road Network  vs.  Hilton Metal Forging

Bharat Road Network

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bharat Road Network has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bharat Road is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Hilton Metal Forging

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Bharat Road and Hilton Metal

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

The idea behind Bharat Road Network and Hilton Metal Forging 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.