Correlation Between Hilton Metal and Elin Electronics

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

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

Diversification Opportunities for Hilton Metal and Elin Electronics

0.07

Correlation Coefficient

Hilton Metal  Elin Electronics

Significant diversification

The 3 months correlation between Hilton and Elin is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Metal Forging and Elin Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elin Electronics and Hilton Metal 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 Hilton Metal Forging are associated (or correlated) with Elin Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elin Electronics has no effect on the direction of Hilton Metal i.e., Hilton Metal and Elin Electronics go up and down completely randomly.

Pair Corralation between Hilton Metal and Elin Electronics

Assuming the 90 days trading horizon Hilton Metal Forging is expected to generate 0.96 times more return on investment than Elin Electronics. However, Hilton Metal Forging is 1.04 times less risky than Elin Electronics. It trades about 0.13 of its potential returns per unit of risk. Elin Electronics Limited is currently generating about -0.06 per unit of risk. If you would invest  8,585  in Hilton Metal Forging on September 27, 2024 and sell it today you would earn a total of  1,750  from holding Hilton Metal Forging or generate 20.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Hilton Metal Forging  vs.  Elin Electronics Limited

Hilton Metal Forging

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Hilton Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Elin Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elin Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Hilton Metal and Elin Electronics

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

The idea behind Hilton Metal Forging and Elin Electronics 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.