Correlation Between Hindustan Copper and Modi Rubber

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

Diversification Opportunities for Hindustan Copper and Modi Rubber

0.84

Correlation Coefficient

Hindustan Copper  Modi Rubber

Very poor diversification

The 3 months correlation between Hindustan and Modi is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Copper Limited and Modi Rubber Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modi Rubber Limited 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 Modi Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modi Rubber Limited has no effect on the direction of Hindustan Copper i.e., Hindustan Copper and Modi Rubber go up and down completely randomly.

Pair Corralation between Hindustan Copper and Modi Rubber

Assuming the 90 days trading horizon Hindustan Copper Limited is expected to generate 0.95 times more return on investment than Modi Rubber. However, Hindustan Copper Limited is 1.06 times less risky than Modi Rubber. It trades about -0.05 of its potential returns per unit of risk. Modi Rubber Limited is currently generating about -0.11 per unit of risk. If you would invest  24,715  in Hindustan Copper Limited on December 28, 2024 and sell it today you would lose (2,636) from holding Hindustan Copper Limited or give up 10.67% of portfolio value over 90 days.

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

Hindustan Copper Limited  vs.  Modi Rubber Limited

Hindustan Copper

Risk-Adjusted Performance

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 latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Modi Rubber Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Modi Rubber Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hindustan Copper and Modi Rubber

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

The idea behind Hindustan Copper Limited and Modi Rubber 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.