Correlation Between Hillenbrand and Premium Catering

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

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

Diversification Opportunities for Hillenbrand and Premium Catering

-0.18

Correlation Coefficient

Hillenbrand  Premium Catering

Good diversification

The 3 months correlation between Hillenbrand and Premium is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Hillenbrand and Premium Catering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Catering and Hillenbrand 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 Hillenbrand are associated (or correlated) with Premium Catering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Catering has no effect on the direction of Hillenbrand i.e., Hillenbrand and Premium Catering go up and down completely randomly.

Pair Corralation between Hillenbrand and Premium Catering

Allowing for the 90-day total investment horizon Hillenbrand is expected to under-perform the Premium Catering. But the stock apears to be less risky and, when comparing its historical volatility, Hillenbrand is 1.73 times less risky than Premium Catering. The stock trades about -0.28 of its potential returns per unit of risk. The Premium Catering Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  71.00  in Premium Catering Limited on December 6, 2024 and sell it today you would earn a total of  19.00  from holding Premium Catering Limited or generate 26.76% return on investment over 90 days.

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

Hillenbrand  vs.  Premium Catering Limited

Hillenbrand

Risk-Adjusted Performance

Very Weak

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

Premium Catering

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Premium Catering Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Premium Catering exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hillenbrand and Premium Catering

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

The idea behind Hillenbrand and Premium Catering 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.