Correlation Between Hilton Metal and HEG

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

Diversification Opportunities for Hilton Metal and HEG

0.76

Correlation Coefficient

Hilton Metal  HEG

Poor diversification

The 3 months correlation between Hilton and HEG is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Metal Forging and HEG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEG Limited 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 HEG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEG Limited has no effect on the direction of Hilton Metal i.e., Hilton Metal and HEG go up and down completely randomly.

Pair Corralation between Hilton Metal and HEG

Assuming the 90 days trading horizon Hilton Metal Forging is expected to generate 0.64 times more return on investment than HEG. However, Hilton Metal Forging is 1.56 times less risky than HEG. It trades about 0.12 of its potential returns per unit of risk. HEG Limited is currently generating about 0.06 per unit of risk. If you would invest  8,480  in Hilton Metal Forging on September 26, 2024 and sell it today you would earn a total of  1,616  from holding Hilton Metal Forging or generate 19.06% return on investment over 90 days.

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

Hilton Metal Forging  vs.  HEG 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.

HEG Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HEG Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, HEG exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hilton Metal and HEG

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

The idea behind Hilton Metal Forging and HEG 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.