Correlation Between Capacite Infraprojects and HEG

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

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

Diversification Opportunities for Capacite Infraprojects and HEG

0.74

Correlation Coefficient

Capacite Infraprojects  HEG

Poor diversification

The 3 months correlation between Capacite and HEG is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Capacite Infraprojects Limited and HEG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEG Limited and Capacite Infraprojects 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 Capacite Infraprojects Limited 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 Capacite Infraprojects i.e., Capacite Infraprojects and HEG go up and down completely randomly.

Pair Corralation between Capacite Infraprojects and HEG

Assuming the 90 days trading horizon Capacite Infraprojects is expected to generate 2.26 times less return on investment than HEG. But when comparing it to its historical volatility, Capacite Infraprojects Limited is 2.81 times less risky than HEG. It trades about 0.29 of its potential returns per unit of risk. HEG Limited is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  41,515  in HEG Limited on September 25, 2024 and sell it today you would earn a total of  11,580  from holding HEG Limited or generate 27.89% return on investment over 90 days.

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

Capacite Infraprojects Limited  vs.  HEG Limited

Capacite Infraprojects

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capacite Infraprojects Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward indicators, Capacite Infraprojects may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Capacite Infraprojects and HEG

The main advantage of trading using opposite Capacite Infraprojects and HEG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capacite Infraprojects 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 Capacite Infraprojects Limited 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..