Correlation Between HMT and Bharti Airtel

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

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

Diversification Opportunities for HMT and Bharti Airtel

0.79

Correlation Coefficient

HMT  Bharti Airtel

Poor diversification

The 3 months correlation between HMT and Bharti is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding HMT Limited and Bharti Airtel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bharti Airtel Limited and HMT 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 HMT Limited are associated (or correlated) with Bharti Airtel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bharti Airtel Limited has no effect on the direction of HMT i.e., HMT and Bharti Airtel go up and down completely randomly.

Pair Corralation between HMT and Bharti Airtel

Assuming the 90 days trading horizon HMT Limited is expected to generate 1.17 times more return on investment than Bharti Airtel. However, HMT is 1.17 times more volatile than Bharti Airtel Limited. It trades about 0.02 of its potential returns per unit of risk. Bharti Airtel Limited is currently generating about 0.02 per unit of risk. If you would invest  6,419  in HMT Limited on September 27, 2024 and sell it today you would earn a total of  29.00  from holding HMT Limited or generate 0.45% return on investment over 90 days.

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

HMT Limited  vs.  Bharti Airtel Limited

HMT Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMT Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bharti Airtel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with HMT and Bharti Airtel

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

The idea behind HMT Limited and Bharti Airtel 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.