Correlation Between Hilton Metal and JSW Holdings

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

Diversification Opportunities for Hilton Metal and JSW Holdings

0.22

Correlation Coefficient

Hilton Metal  JSW Holdings

Modest diversification

The 3 months correlation between Hilton and JSW is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Metal Forging and JSW Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSW Holdings 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 JSW Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSW Holdings Limited has no effect on the direction of Hilton Metal i.e., Hilton Metal and JSW Holdings go up and down completely randomly.

Pair Corralation between Hilton Metal and JSW Holdings

Assuming the 90 days trading horizon Hilton Metal is expected to generate 4.54 times less return on investment than JSW Holdings. But when comparing it to its historical volatility, Hilton Metal Forging is 1.38 times less risky than JSW Holdings. It trades about 0.05 of its potential returns per unit of risk. JSW Holdings Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  743,040  in JSW Holdings Limited on September 29, 2024 and sell it today you would earn a total of  711,675  from holding JSW Holdings Limited or generate 95.78% 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.  JSW Holdings Limited

Hilton Metal Forging

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 10 (%) 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.

JSW Holdings Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Holdings Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, JSW Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hilton Metal and JSW Holdings

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

The idea behind Hilton Metal Forging and JSW Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.