Correlation Between Cantabil Retail and Hindcon Chemicals

Can any of the company-specific risk be diversified away by investing in both Cantabil Retail and Hindcon Chemicals 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 Hindcon Chemicals 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 Hindcon Chemicals Limited, you can compare the effects of market volatilities on Cantabil Retail and Hindcon Chemicals 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 Hindcon Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cantabil Retail and Hindcon Chemicals.

Diversification Opportunities for Cantabil Retail and Hindcon Chemicals

0.71

Correlation Coefficient

Cantabil Retail  Hindcon Chemicals

Poor diversification

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

Pair Corralation between Cantabil Retail and Hindcon Chemicals

Assuming the 90 days trading horizon Cantabil Retail India is expected to under-perform the Hindcon Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Cantabil Retail India is 1.84 times less risky than Hindcon Chemicals. The stock trades about -0.05 of its potential returns per unit of risk. The Hindcon Chemicals Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,298  in Hindcon Chemicals Limited on September 2, 2024 and sell it today you would earn a total of  285.00  from holding Hindcon Chemicals Limited or generate 5.38% return on investment over 90 days.

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

Cantabil Retail India  vs.  Hindcon Chemicals Limited

Cantabil Retail India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cantabil Retail India has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Cantabil Retail is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Hindcon Chemicals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hindcon Chemicals Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Hindcon Chemicals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cantabil Retail and Hindcon Chemicals

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

The idea behind Cantabil Retail India and Hindcon Chemicals 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.