Correlation Between HMT and MphasiS

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

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

Diversification Opportunities for HMT and MphasiS

0.32

Correlation Coefficient

HMT  MphasiS

Weak diversification

The 3 months correlation between HMT and MphasiS is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding HMT Limited and MphasiS Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MphasiS 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 MphasiS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MphasiS Limited has no effect on the direction of HMT i.e., HMT and MphasiS go up and down completely randomly.

Pair Corralation between HMT and MphasiS

Assuming the 90 days trading horizon HMT Limited is expected to under-perform the MphasiS. In addition to that, HMT is 1.23 times more volatile than MphasiS Limited. It trades about -0.17 of its total potential returns per unit of risk. MphasiS Limited is currently generating about 0.02 per unit of volatility. If you would invest  314,615  in MphasiS Limited on September 13, 2024 and sell it today you would earn a total of  3,840  from holding MphasiS Limited or generate 1.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

HMT Limited  vs.  MphasiS 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 inconsistent 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.

MphasiS Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MphasiS Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MphasiS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with HMT and MphasiS

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

The idea behind HMT Limited and MphasiS 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.