Correlation Between Hindustan Foods and Iris Clothings

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

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

Diversification Opportunities for Hindustan Foods and Iris Clothings

0.89

Correlation Coefficient

Hindustan Foods  Iris Clothings

Very poor diversification

The 3 months correlation between Hindustan and Iris is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Foods Limited and Iris Clothings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iris Clothings and Hindustan Foods 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 Hindustan Foods Limited are associated (or correlated) with Iris Clothings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iris Clothings has no effect on the direction of Hindustan Foods i.e., Hindustan Foods and Iris Clothings go up and down completely randomly.

Pair Corralation between Hindustan Foods and Iris Clothings

Assuming the 90 days trading horizon Hindustan Foods Limited is expected to under-perform the Iris Clothings. But the stock apears to be less risky and, when comparing its historical volatility, Hindustan Foods Limited is 15.2 times less risky than Iris Clothings. The stock trades about -0.01 of its potential returns per unit of risk. The Iris Clothings Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,401  in Iris Clothings Limited on October 9, 2024 and sell it today you would earn a total of  755.00  from holding Iris Clothings Limited or generate 13.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Hindustan Foods Limited  vs.  Iris Clothings Limited

Hindustan Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindustan Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Iris Clothings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iris Clothings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Hindustan Foods and Iris Clothings

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

The idea behind Hindustan Foods Limited and Iris Clothings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.