Correlation Between Hindustan Construction and Consolidated Construction

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

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

Diversification Opportunities for Hindustan Construction and Consolidated Construction

0.32

Correlation Coefficient

Hindustan Construction  Consolidated Construction

Weak diversification

The 3 months correlation between Hindustan and Consolidated is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Construction and Consolidated Construction Cons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Construction and Hindustan Construction 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 Hindustan Construction are associated (or correlated) with Consolidated Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Construction has no effect on the direction of Hindustan Construction i.e., Hindustan Construction and Consolidated Construction go up and down completely randomly.

Pair Corralation between Hindustan Construction and Consolidated Construction

Assuming the 90 days trading horizon Hindustan Construction is expected to generate 7.4 times less return on investment than Consolidated Construction. But when comparing it to its historical volatility, Hindustan Construction is 7.75 times less risky than Consolidated Construction. It trades about 0.05 of its potential returns per unit of risk. Consolidated Construction Consortium is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  150.00  in Consolidated Construction Consortium on October 24, 2024 and sell it today you would earn a total of  1,659  from holding Consolidated Construction Consortium or generate 1106.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

Hindustan Construction  vs.  Consolidated Construction Cons

Hindustan Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

Consolidated Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consolidated Construction Consortium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Consolidated Construction is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hindustan Construction and Consolidated Construction

The main advantage of trading using opposite Hindustan Construction and Consolidated Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hindustan Construction position performs unexpectedly, Consolidated Construction 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 Consolidated Construction will offset losses from the drop in Consolidated Construction's long position.

The idea behind Hindustan Construction and Consolidated Construction Consortium 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.