Correlation Between Hi-Tech Gears and Exxaro Tiles

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

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

Diversification Opportunities for Hi-Tech Gears and Exxaro Tiles

0.43

Correlation Coefficient

Hi-Tech Gears  Exxaro Tiles

Very weak diversification

The 3 months correlation between Hi-Tech and Exxaro is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding The Hi Tech Gears and Exxaro Tiles Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxaro Tiles Limited and Hi-Tech Gears 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 The Hi Tech Gears are associated (or correlated) with Exxaro Tiles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxaro Tiles Limited has no effect on the direction of Hi-Tech Gears i.e., Hi-Tech Gears and Exxaro Tiles go up and down completely randomly.

Pair Corralation between Hi-Tech Gears and Exxaro Tiles

Assuming the 90 days trading horizon The Hi Tech Gears is expected to generate 0.86 times more return on investment than Exxaro Tiles. However, The Hi Tech Gears is 1.17 times less risky than Exxaro Tiles. It trades about -0.18 of its potential returns per unit of risk. Exxaro Tiles Limited is currently generating about -0.24 per unit of risk. If you would invest  79,660  in The Hi Tech Gears on December 28, 2024 and sell it today you would lose (19,735) from holding The Hi Tech Gears or give up 24.77% of portfolio value over 90 days.

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

The Hi Tech Gears  vs.  Exxaro Tiles Limited

Hi-Tech Gears

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Hi Tech Gears 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Exxaro Tiles Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exxaro Tiles 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 basic indicators 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 Hi-Tech Gears and Exxaro Tiles

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

The idea behind The Hi Tech Gears and Exxaro Tiles 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.