Correlation Between Hindustan Foods and SBI Cards

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

Diversification Opportunities for Hindustan Foods and SBI Cards

0.4

Correlation Coefficient

Hindustan Foods  SBI Cards

Very weak diversification

The 3 months correlation between Hindustan and SBI is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Foods Limited and SBI Cards and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Cards 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 SBI Cards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Cards has no effect on the direction of Hindustan Foods i.e., Hindustan Foods and SBI Cards go up and down completely randomly.

Pair Corralation between Hindustan Foods and SBI Cards

Assuming the 90 days trading horizon Hindustan Foods is expected to generate 2.62 times less return on investment than SBI Cards. In addition to that, Hindustan Foods is 1.38 times more volatile than SBI Cards and. It trades about 0.06 of its total potential returns per unit of risk. SBI Cards and is currently generating about 0.2 per unit of volatility. If you would invest  69,383  in SBI Cards and on December 25, 2024 and sell it today you would earn a total of  16,537  from holding SBI Cards and or generate 23.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

Hindustan Foods Limited  vs.  SBI Cards and

Hindustan Foods

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hindustan Foods Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Hindustan Foods may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SBI Cards

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Cards and are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, SBI Cards exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hindustan Foods and SBI Cards

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

The idea behind Hindustan Foods Limited and SBI Cards and 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.