Correlation Between Hilton Metal and HMT

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

Diversification Opportunities for Hilton Metal and HMT

-0.15

Correlation Coefficient

Hilton Metal  HMT

Good diversification

The 3 months correlation between Hilton and HMT is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Metal Forging and HMT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMT 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 HMT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMT Limited has no effect on the direction of Hilton Metal i.e., Hilton Metal and HMT go up and down completely randomly.

Pair Corralation between Hilton Metal and HMT

Assuming the 90 days trading horizon Hilton Metal Forging is expected to generate 1.28 times more return on investment than HMT. However, Hilton Metal is 1.28 times more volatile than HMT Limited. It trades about 0.1 of its potential returns per unit of risk. HMT Limited is currently generating about -0.02 per unit of risk. If you would invest  7,970  in Hilton Metal Forging on October 24, 2024 and sell it today you would earn a total of  1,343  from holding Hilton Metal Forging or generate 16.85% return on investment over 90 days.

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

Hilton Metal Forging  vs.  HMT Limited

Hilton Metal Forging

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Hilton Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

HMT Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMT Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, HMT is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Hilton Metal and HMT

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

The idea behind Hilton Metal Forging and HMT 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.