Correlation Between HMT and Bharat Road

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

By analyzing existing cross correlation between HMT Limited and Bharat Road Network, you can compare the effects of market volatilities on HMT and Bharat Road 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 Bharat Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMT and Bharat Road.

Diversification Opportunities for HMT and Bharat Road

0.83

Correlation Coefficient

HMT  Bharat Road

Very poor diversification

The 3 months correlation between HMT and Bharat is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding HMT Limited and Bharat Road Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bharat Road Network 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 Bharat Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bharat Road Network has no effect on the direction of HMT i.e., HMT and Bharat Road go up and down completely randomly.

Pair Corralation between HMT and Bharat Road

Assuming the 90 days trading horizon HMT Limited is expected to generate 0.7 times more return on investment than Bharat Road. However, HMT Limited is 1.43 times less risky than Bharat Road. It trades about -0.17 of its potential returns per unit of risk. Bharat Road Network is currently generating about -0.12 per unit of risk. If you would invest  6,389  in HMT Limited on December 21, 2024 and sell it today you would lose (1,651) from holding HMT Limited or give up 25.84% of portfolio value over 90 days.

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

HMT Limited  vs.  Bharat Road Network

HMT Limited

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bharat Road Network

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bharat Road Network has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with HMT and Bharat Road

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

The idea behind HMT Limited and Bharat Road Network 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.

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..