Correlation Between Hindustan Construction and Raj Rayon

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

By analyzing existing cross correlation between Hindustan Construction and Raj Rayon Industries, you can compare the effects of market volatilities on Hindustan Construction and Raj Rayon 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 Raj Rayon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hindustan Construction and Raj Rayon.

Diversification Opportunities for Hindustan Construction and Raj Rayon

0.44

Correlation Coefficient

Hindustan Construction  Raj Rayon

Very weak diversification

The 3 months correlation between Hindustan and Raj is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Construction and Raj Rayon Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raj Rayon Industries 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 Raj Rayon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raj Rayon Industries has no effect on the direction of Hindustan Construction i.e., Hindustan Construction and Raj Rayon go up and down completely randomly.

Pair Corralation between Hindustan Construction and Raj Rayon

Assuming the 90 days trading horizon Hindustan Construction is expected to generate 2.19 times more return on investment than Raj Rayon. However, Hindustan Construction is 2.19 times more volatile than Raj Rayon Industries. It trades about 0.04 of its potential returns per unit of risk. Raj Rayon Industries is currently generating about -0.06 per unit of risk. If you would invest  4,506  in Hindustan Construction on September 12, 2024 and sell it today you would earn a total of  179.00  from holding Hindustan Construction or generate 3.97% return on investment over 90 days.

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

Hindustan Construction  vs.  Raj Rayon Industries

Hindustan Construction

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hindustan Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Hindustan Construction may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Raj Rayon Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raj Rayon Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Raj Rayon 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 Raj Rayon

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

The idea behind Hindustan Construction and Raj Rayon Industries 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.