Correlation Between Hilton Metal and Xchanging Solutions

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

Diversification Opportunities for Hilton Metal and Xchanging Solutions

0.29

Correlation Coefficient

Hilton Metal  Xchanging Solutions

Modest diversification

The 3 months correlation between Hilton and Xchanging is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Metal Forging and Xchanging Solutions Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xchanging Solutions 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 Xchanging Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xchanging Solutions has no effect on the direction of Hilton Metal i.e., Hilton Metal and Xchanging Solutions go up and down completely randomly.

Pair Corralation between Hilton Metal and Xchanging Solutions

Assuming the 90 days trading horizon Hilton Metal is expected to generate 1.67 times less return on investment than Xchanging Solutions. But when comparing it to its historical volatility, Hilton Metal Forging is 1.15 times less risky than Xchanging Solutions. It trades about 0.04 of its potential returns per unit of risk. Xchanging Solutions Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,258  in Xchanging Solutions Limited on September 26, 2024 and sell it today you would earn a total of  6,029  from holding Xchanging Solutions Limited or generate 114.66% 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.  Xchanging Solutions 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.

Xchanging Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xchanging Solutions Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Xchanging Solutions is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Hilton Metal and Xchanging Solutions

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

The idea behind Hilton Metal Forging and Xchanging Solutions 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.