Correlation Between Hi Tech and DiGiSPICE Technologies

Can any of the company-specific risk be diversified away by investing in both Hi Tech and DiGiSPICE Technologies 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 Hi Tech and DiGiSPICE Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hi Tech Pipes Limited and DiGiSPICE Technologies Limited, you can compare the effects of market volatilities on Hi Tech and DiGiSPICE Technologies 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 Hi Tech with a short position of DiGiSPICE Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hi Tech and DiGiSPICE Technologies.

Diversification Opportunities for Hi Tech and DiGiSPICE Technologies

0.87

Correlation Coefficient

Hi Tech  DiGiSPICE Technologies

Very poor diversification

The 3 months correlation between HITECH and DiGiSPICE is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Hi Tech Pipes Limited and DiGiSPICE Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiGiSPICE Technologies and Hi Tech 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 Hi Tech Pipes Limited are associated (or correlated) with DiGiSPICE Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DiGiSPICE Technologies has no effect on the direction of Hi Tech i.e., Hi Tech and DiGiSPICE Technologies go up and down completely randomly.

Pair Corralation between Hi Tech and DiGiSPICE Technologies

Assuming the 90 days trading horizon Hi Tech Pipes Limited is expected to generate 0.88 times more return on investment than DiGiSPICE Technologies. However, Hi Tech Pipes Limited is 1.14 times less risky than DiGiSPICE Technologies. It trades about -0.07 of its potential returns per unit of risk. DiGiSPICE Technologies Limited is currently generating about -0.09 per unit of risk. If you would invest  19,404  in Hi Tech Pipes Limited on September 12, 2024 and sell it today you would lose (2,192) from holding Hi Tech Pipes Limited or give up 11.3% of portfolio value over 90 days.

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

Hi Tech Pipes Limited  vs.  DiGiSPICE Technologies Limited

Hi Tech Pipes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hi Tech Pipes Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

DiGiSPICE Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DiGiSPICE Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Hi Tech and DiGiSPICE Technologies

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

The idea behind Hi Tech Pipes Limited and DiGiSPICE Technologies 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.