Correlation Between Hi Tech and Crescent Star

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

By analyzing existing cross correlation between Hi Tech Lubricants and Crescent Star Insurance, you can compare the effects of market volatilities on Hi Tech and Crescent Star 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 Hi Tech with a short position of Crescent Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hi Tech and Crescent Star.

Diversification Opportunities for Hi Tech and Crescent Star

0.65

Correlation Coefficient

Hi Tech  Crescent Star

Poor diversification

The 3 months correlation between HTL and Crescent is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hi Tech Lubricants and Crescent Star Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Star Insurance and Hi Tech 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 Hi Tech Lubricants are associated (or correlated) with Crescent Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Star Insurance has no effect on the direction of Hi Tech i.e., Hi Tech and Crescent Star go up and down completely randomly.

Pair Corralation between Hi Tech and Crescent Star

Assuming the 90 days trading horizon Hi Tech Lubricants is expected to under-perform the Crescent Star. In addition to that, Hi Tech is 1.27 times more volatile than Crescent Star Insurance. It trades about -0.09 of its total potential returns per unit of risk. Crescent Star Insurance is currently generating about -0.03 per unit of volatility. If you would invest  281.00  in Crescent Star Insurance on December 30, 2024 and sell it today you would lose (13.00) from holding Crescent Star Insurance or give up 4.63% of portfolio value over 90 days.

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

Hi Tech Lubricants  vs.  Crescent Star Insurance

Hi Tech Lubricants

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hi Tech Lubricants has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Crescent Star Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Crescent Star Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Crescent Star is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hi Tech and Crescent Star

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

The idea behind Hi Tech Lubricants and Crescent Star Insurance 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 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.