Correlation Between Gujarat Fluorochemicals and Hilton Metal

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

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

Diversification Opportunities for Gujarat Fluorochemicals and Hilton Metal

-0.02

Correlation Coefficient

Gujarat Fluorochemicals  Hilton Metal

Good diversification

The 3 months correlation between Gujarat and Hilton is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Fluorochemicals Limite 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 Gujarat Fluorochemicals 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 Gujarat Fluorochemicals Limited 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 Gujarat Fluorochemicals i.e., Gujarat Fluorochemicals and Hilton Metal go up and down completely randomly.

Pair Corralation between Gujarat Fluorochemicals and Hilton Metal

Assuming the 90 days trading horizon Gujarat Fluorochemicals Limited is expected to generate 0.71 times more return on investment than Hilton Metal. However, Gujarat Fluorochemicals Limited is 1.41 times less risky than Hilton Metal. It trades about 0.04 of its potential returns per unit of risk. Hilton Metal Forging is currently generating about 0.02 per unit of risk. If you would invest  267,990  in Gujarat Fluorochemicals Limited on October 25, 2024 and sell it today you would earn a total of  99,990  from holding Gujarat Fluorochemicals Limited or generate 37.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

Gujarat Fluorochemicals Limite  vs.  Hilton Metal Forging

Gujarat Fluorochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gujarat Fluorochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Hilton Metal Forging

Risk-Adjusted Performance

8 of 100

Modest

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 unsteady basic indicators, Hilton Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gujarat Fluorochemicals and Hilton Metal

The main advantage of trading using opposite Gujarat Fluorochemicals and Hilton Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gujarat Fluorochemicals 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 Gujarat Fluorochemicals Limited 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.