Correlation Between Fortis Healthcare and Hindcon Chemicals

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

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

Diversification Opportunities for Fortis Healthcare and Hindcon Chemicals

-0.76

Correlation Coefficient

Fortis Healthcare  Hindcon Chemicals

Pay attention - limited upside

The 3 months correlation between Fortis and Hindcon is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Fortis Healthcare Limited and Hindcon Chemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindcon Chemicals and Fortis Healthcare 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 Fortis Healthcare Limited 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 Fortis Healthcare i.e., Fortis Healthcare and Hindcon Chemicals go up and down completely randomly.

Pair Corralation between Fortis Healthcare and Hindcon Chemicals

Assuming the 90 days trading horizon Fortis Healthcare Limited is expected to generate 0.53 times more return on investment than Hindcon Chemicals. However, Fortis Healthcare Limited is 1.88 times less risky than Hindcon Chemicals. It trades about 0.13 of its potential returns per unit of risk. Hindcon Chemicals Limited is currently generating about 0.04 per unit of risk. If you would invest  56,185  in Fortis Healthcare Limited on September 2, 2024 and sell it today you would earn a total of  9,735  from holding Fortis Healthcare Limited or generate 17.33% return on investment over 90 days.

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

Fortis Healthcare Limited  vs.  Hindcon Chemicals Limited

Fortis Healthcare

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortis Healthcare Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Fortis Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Fortis Healthcare and Hindcon Chemicals

The main advantage of trading using opposite Fortis Healthcare and Hindcon Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortis Healthcare 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 Fortis Healthcare Limited 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.