Correlation Between Gujarat Lease and HEG

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

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

Diversification Opportunities for Gujarat Lease and HEG

0.49

Correlation Coefficient

Gujarat Lease  HEG

Very weak diversification

The 3 months correlation between Gujarat and HEG is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Lease Financing and HEG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEG Limited and Gujarat Lease 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 Lease Financing 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 Gujarat Lease i.e., Gujarat Lease and HEG go up and down completely randomly.

Pair Corralation between Gujarat Lease and HEG

Assuming the 90 days trading horizon Gujarat Lease is expected to generate 167.46 times less return on investment than HEG. But when comparing it to its historical volatility, Gujarat Lease Financing is 68.72 times less risky than HEG. It trades about 0.08 of its potential returns per unit of risk. HEG Limited is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  17,729  in HEG Limited on September 26, 2024 and sell it today you would earn a total of  35,366  from holding HEG Limited or generate 199.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.06%
Values	Daily Returns

Gujarat Lease Financing  vs.  HEG Limited

Gujarat Lease Financing

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Gujarat Lease 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 conflicting technical and fundamental indicators, HEG exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gujarat Lease and HEG

The main advantage of trading using opposite Gujarat Lease and HEG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gujarat Lease 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 Gujarat Lease Financing 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.