Correlation Between Hi Tech and Kavveri Telecom

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

Diversification Opportunities for Hi Tech and Kavveri Telecom

0.1

Correlation Coefficient

Hi Tech  Kavveri Telecom

Average diversification

The 3 months correlation between HITECHGEAR and Kavveri is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding The Hi Tech Gears and Kavveri Telecom Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kavveri Telecom Products 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 Kavveri Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kavveri Telecom Products has no effect on the direction of Hi Tech i.e., Hi Tech and Kavveri Telecom go up and down completely randomly.

Pair Corralation between Hi Tech and Kavveri Telecom

Assuming the 90 days trading horizon The Hi Tech Gears is expected to generate 1.28 times more return on investment than Kavveri Telecom. However, Hi Tech is 1.28 times more volatile than Kavveri Telecom Products. It trades about -0.17 of its potential returns per unit of risk. Kavveri Telecom Products is currently generating about -0.36 per unit of risk. If you would invest  85,435  in The Hi Tech Gears on October 22, 2024 and sell it today you would lose (6,485) from holding The Hi Tech Gears or give up 7.59% of portfolio value over 90 days.

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

The Hi Tech Gears  vs.  Kavveri Telecom Products

Hi Tech

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Hi Tech Gears are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Hi Tech is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Kavveri Telecom Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kavveri Telecom Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Hi Tech and Kavveri Telecom

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

The idea behind The Hi Tech Gears and Kavveri Telecom Products 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.