Correlation Between Hilton Metal and Ramco Cements

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

Diversification Opportunities for Hilton Metal and Ramco Cements

0.41

Correlation Coefficient

Hilton Metal  Ramco Cements

Very weak diversification

The 3 months correlation between Hilton and Ramco is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Metal Forging and The Ramco Cements in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramco Cements 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 Ramco Cements. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramco Cements has no effect on the direction of Hilton Metal i.e., Hilton Metal and Ramco Cements go up and down completely randomly.

Pair Corralation between Hilton Metal and Ramco Cements

Assuming the 90 days trading horizon Hilton Metal Forging is expected to generate 1.68 times more return on investment than Ramco Cements. However, Hilton Metal is 1.68 times more volatile than The Ramco Cements. It trades about 0.07 of its potential returns per unit of risk. The Ramco Cements is currently generating about 0.06 per unit of risk. If you would invest  8,082  in Hilton Metal Forging on October 26, 2024 and sell it today you would earn a total of  962.00  from holding Hilton Metal Forging or generate 11.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Hilton Metal Forging  vs.  The Ramco Cements

Hilton Metal Forging

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 5 (%) 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.

Ramco Cements

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Ramco Cements are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Ramco Cements may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hilton Metal and Ramco Cements

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

The idea behind Hilton Metal Forging and The Ramco Cements 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.