Correlation Between Hindustan Foods and Ratnamani Metals

Can any of the company-specific risk be diversified away by investing in both Hindustan Foods and Ratnamani Metals 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 Ratnamani Metals 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 Ratnamani Metals Tubes, you can compare the effects of market volatilities on Hindustan Foods and Ratnamani Metals 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 Ratnamani Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hindustan Foods and Ratnamani Metals.

Diversification Opportunities for Hindustan Foods and Ratnamani Metals

0.86

Correlation Coefficient

Hindustan Foods  Ratnamani Metals

Very poor diversification

The 3 months correlation between Hindustan and Ratnamani is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Foods Limited and Ratnamani Metals Tubes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ratnamani Metals Tubes 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 Ratnamani Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ratnamani Metals Tubes has no effect on the direction of Hindustan Foods i.e., Hindustan Foods and Ratnamani Metals go up and down completely randomly.

Pair Corralation between Hindustan Foods and Ratnamani Metals

Assuming the 90 days trading horizon Hindustan Foods Limited is expected to generate 0.71 times more return on investment than Ratnamani Metals. However, Hindustan Foods Limited is 1.41 times less risky than Ratnamani Metals. It trades about -0.53 of its potential returns per unit of risk. Ratnamani Metals Tubes is currently generating about -0.44 per unit of risk. If you would invest  53,360  in Hindustan Foods Limited on October 23, 2024 and sell it today you would lose (3,980) from holding Hindustan Foods Limited or give up 7.46% of portfolio value over 90 days.

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

Hindustan Foods Limited  vs.  Ratnamani Metals Tubes

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 unsteady 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.

Ratnamani Metals Tubes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ratnamani Metals Tubes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic 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.

Pair Trading with Hindustan Foods and Ratnamani Metals

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

The idea behind Hindustan Foods Limited and Ratnamani Metals Tubes 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.