Correlation Between HCL Technologies and State Trading

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

By analyzing existing cross correlation between HCL Technologies Limited and The State Trading, you can compare the effects of market volatilities on HCL Technologies and State Trading 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 HCL Technologies with a short position of State Trading. Check out your portfolio center. Please also check ongoing floating volatility patterns of HCL Technologies and State Trading.

Diversification Opportunities for HCL Technologies and State Trading

0.86

Correlation Coefficient

HCL Technologies  State Trading

Very poor diversification

The 3 months correlation between HCL and State is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding HCL Technologies Limited and The State Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Trading and HCL Technologies 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 HCL Technologies Limited are associated (or correlated) with State Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Trading has no effect on the direction of HCL Technologies i.e., HCL Technologies and State Trading go up and down completely randomly.

Pair Corralation between HCL Technologies and State Trading

Assuming the 90 days trading horizon HCL Technologies Limited is expected to generate 0.57 times more return on investment than State Trading. However, HCL Technologies Limited is 1.74 times less risky than State Trading. It trades about -0.11 of its potential returns per unit of risk. The State Trading is currently generating about -0.15 per unit of risk. If you would invest  184,186  in HCL Technologies Limited on November 29, 2024 and sell it today you would lose (21,266) from holding HCL Technologies Limited or give up 11.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

HCL Technologies Limited  vs.  The State Trading

HCL Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days HCL Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

State Trading

Risk-Adjusted Performance

Very Weak

Over the last 90 days The State Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with HCL Technologies and State Trading

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

The idea behind HCL Technologies Limited and The State Trading 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.