Correlation Between HMT and Maharashtra Scooters

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

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

Diversification Opportunities for HMT and Maharashtra Scooters

0.53

Correlation Coefficient

HMT  Maharashtra Scooters

Very weak diversification

The 3 months correlation between HMT and Maharashtra is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding HMT Limited and Maharashtra Scooters Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maharashtra Scooters 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 Maharashtra Scooters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maharashtra Scooters has no effect on the direction of HMT i.e., HMT and Maharashtra Scooters go up and down completely randomly.

Pair Corralation between HMT and Maharashtra Scooters

Assuming the 90 days trading horizon HMT Limited is expected to under-perform the Maharashtra Scooters. But the stock apears to be less risky and, when comparing its historical volatility, HMT Limited is 1.14 times less risky than Maharashtra Scooters. The stock trades about -0.14 of its potential returns per unit of risk. The Maharashtra Scooters Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  982,625  in Maharashtra Scooters Limited on September 5, 2024 and sell it today you would lose (32,585) from holding Maharashtra Scooters Limited or give up 3.32% of portfolio value over 90 days.

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

HMT Limited  vs.  Maharashtra Scooters 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 unsteady 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.

Maharashtra Scooters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maharashtra Scooters Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Maharashtra Scooters is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with HMT and Maharashtra Scooters

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

The idea behind HMT Limited and Maharashtra Scooters 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.