Correlation Between General Insurance and Hindcon Chemicals

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

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

Diversification Opportunities for General Insurance and Hindcon Chemicals

0.2

Correlation Coefficient

General Insurance  Hindcon Chemicals

Modest diversification

The 3 months correlation between General and Hindcon is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding General Insurance and Hindcon Chemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindcon Chemicals and General Insurance 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 General Insurance 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 General Insurance i.e., General Insurance and Hindcon Chemicals go up and down completely randomly.

Pair Corralation between General Insurance and Hindcon Chemicals

Assuming the 90 days trading horizon General Insurance is expected to generate 0.68 times more return on investment than Hindcon Chemicals. However, General Insurance is 1.47 times less risky than Hindcon Chemicals. It trades about 0.15 of its potential returns per unit of risk. Hindcon Chemicals Limited is currently generating about 0.01 per unit of risk. If you would invest  36,315  in General Insurance on October 6, 2024 and sell it today you would earn a total of  9,455  from holding General Insurance or generate 26.04% return on investment over 90 days.

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

General Insurance  vs.  Hindcon Chemicals Limited

General Insurance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, General Insurance displayed solid returns over the last few months and may actually be approaching a breakup point.

Hindcon Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindcon Chemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Hindcon Chemicals is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with General Insurance and Hindcon Chemicals

The main advantage of trading using opposite General Insurance and Hindcon Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Insurance 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 General Insurance 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.