Correlation Between Hilton Metal and Hindustan Construction

Can any of the company-specific risk be diversified away by investing in both Hilton Metal and Hindustan 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 Hilton Metal and Hindustan Construction 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 Hindustan Construction, you can compare the effects of market volatilities on Hilton Metal and Hindustan 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 Hilton Metal with a short position of Hindustan Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hilton Metal and Hindustan Construction.

Diversification Opportunities for Hilton Metal and Hindustan Construction

0.39

Correlation Coefficient

Hilton Metal  Hindustan Construction

Weak diversification

The 3 months correlation between Hilton and Hindustan is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Metal Forging and Hindustan Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindustan Construction 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 Hindustan Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindustan Construction has no effect on the direction of Hilton Metal i.e., Hilton Metal and Hindustan Construction go up and down completely randomly.

Pair Corralation between Hilton Metal and Hindustan Construction

Assuming the 90 days trading horizon Hilton Metal Forging is expected to generate 1.09 times more return on investment than Hindustan Construction. However, Hilton Metal is 1.09 times more volatile than Hindustan Construction. It trades about 0.34 of its potential returns per unit of risk. Hindustan Construction is currently generating about -0.23 per unit of risk. If you would invest  9,183  in Hilton Metal Forging on October 7, 2024 and sell it today you would earn a total of  2,244  from holding Hilton Metal Forging or generate 24.44% return on investment over 90 days.

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

Hilton Metal Forging  vs.  Hindustan Construction

Hilton Metal Forging

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hilton Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Hindustan Construction

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hindustan Construction are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Hindustan Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hilton Metal and Hindustan Construction

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

The idea behind Hilton Metal Forging and Hindustan Construction 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.