Correlation Between Hi Tech and Iris Clothings

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

Diversification Opportunities for Hi Tech and Iris Clothings

0.44

Correlation Coefficient

Hi Tech  Iris Clothings

Very weak diversification

The 3 months correlation between HITECHGEAR and Iris is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding The Hi Tech Gears and Iris Clothings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iris Clothings 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 The Hi Tech Gears are associated (or correlated) with Iris Clothings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iris Clothings has no effect on the direction of Hi Tech i.e., Hi Tech and Iris Clothings go up and down completely randomly.

Pair Corralation between Hi Tech and Iris Clothings

Assuming the 90 days trading horizon The Hi Tech Gears is expected to generate 1.29 times more return on investment than Iris Clothings. However, Hi Tech is 1.29 times more volatile than Iris Clothings Limited. It trades about 0.07 of its potential returns per unit of risk. Iris Clothings Limited is currently generating about -0.03 per unit of risk. If you would invest  39,508  in The Hi Tech Gears on October 3, 2024 and sell it today you would earn a total of  40,617  from holding The Hi Tech Gears or generate 102.81% return on investment over 90 days.

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

The Hi Tech Gears  vs.  Iris Clothings Limited

Hi Tech

Risk-Adjusted Performance

0 of 100

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 latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Iris Clothings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hi Tech and Iris Clothings

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

The idea behind The Hi Tech Gears and Iris Clothings 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.