Correlation Between Cantabil Retail and HCL Technologies

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

By analyzing existing cross correlation between Cantabil Retail India and HCL Technologies Limited, you can compare the effects of market volatilities on Cantabil Retail and HCL Technologies 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 Cantabil Retail with a short position of HCL Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cantabil Retail and HCL Technologies.

Diversification Opportunities for Cantabil Retail and HCL Technologies

0.56

Correlation Coefficient

Cantabil Retail  HCL Technologies

Very weak diversification

The 3 months correlation between Cantabil and HCL is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Cantabil Retail India and HCL Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCL Technologies and Cantabil Retail 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 Cantabil Retail India are associated (or correlated) with HCL Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCL Technologies has no effect on the direction of Cantabil Retail i.e., Cantabil Retail and HCL Technologies go up and down completely randomly.

Pair Corralation between Cantabil Retail and HCL Technologies

Assuming the 90 days trading horizon Cantabil Retail India is expected to generate 1.9 times more return on investment than HCL Technologies. However, Cantabil Retail is 1.9 times more volatile than HCL Technologies Limited. It trades about 0.2 of its potential returns per unit of risk. HCL Technologies Limited is currently generating about 0.13 per unit of risk. If you would invest  22,572  in Cantabil Retail India on October 7, 2024 and sell it today you would earn a total of  7,068  from holding Cantabil Retail India or generate 31.31% return on investment over 90 days.

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

Cantabil Retail India  vs.  HCL Technologies Limited

Cantabil Retail India

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cantabil Retail India are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Cantabil Retail demonstrated solid returns over the last few months and may actually be approaching a breakup point.

HCL Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HCL Technologies Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, HCL Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cantabil Retail and HCL Technologies

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

The idea behind Cantabil Retail India and HCL Technologies 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.