Correlation Between Hindustan Copper and Archean Chemical

Can any of the company-specific risk be diversified away by investing in both Hindustan Copper and Archean Chemical 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 Hindustan Copper and Archean Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hindustan Copper Limited and Archean Chemical Industries, you can compare the effects of market volatilities on Hindustan Copper and Archean Chemical 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 Hindustan Copper with a short position of Archean Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hindustan Copper and Archean Chemical.

Diversification Opportunities for Hindustan Copper and Archean Chemical

0.23

Correlation Coefficient

Hindustan Copper  Archean Chemical

Modest diversification

The 3 months correlation between Hindustan and Archean is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Copper Limited and Archean Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archean Chemical Ind and Hindustan Copper 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 Hindustan Copper Limited are associated (or correlated) with Archean Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archean Chemical Ind has no effect on the direction of Hindustan Copper i.e., Hindustan Copper and Archean Chemical go up and down completely randomly.

Pair Corralation between Hindustan Copper and Archean Chemical

Assuming the 90 days trading horizon Hindustan Copper Limited is expected to generate 1.3 times more return on investment than Archean Chemical. However, Hindustan Copper is 1.3 times more volatile than Archean Chemical Industries. It trades about 0.07 of its potential returns per unit of risk. Archean Chemical Industries is currently generating about 0.03 per unit of risk. If you would invest  11,859  in Hindustan Copper Limited on September 28, 2024 and sell it today you would earn a total of  13,791  from holding Hindustan Copper Limited or generate 116.29% return on investment over 90 days.

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

Hindustan Copper Limited  vs.  Archean Chemical Industries

Hindustan Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindustan Copper Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Archean Chemical Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Archean Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Hindustan Copper and Archean Chemical

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

The idea behind Hindustan Copper Limited and Archean Chemical Industries 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.