Correlation Between Hi Tech and First Credit

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

Diversification Opportunities for Hi Tech and First Credit

0.27

Correlation Coefficient

Hi Tech  First Credit

Modest diversification

The 3 months correlation between HTL and First is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Hi Tech Lubricants and First Credit And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Credit And 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 First Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Credit And has no effect on the direction of Hi Tech i.e., Hi Tech and First Credit go up and down completely randomly.

Pair Corralation between Hi Tech and First Credit

Assuming the 90 days trading horizon Hi Tech Lubricants is expected to generate 0.68 times more return on investment than First Credit. However, Hi Tech Lubricants is 1.47 times less risky than First Credit. It trades about 0.09 of its potential returns per unit of risk. First Credit And is currently generating about 0.03 per unit of risk. If you would invest  3,957  in Hi Tech Lubricants on October 25, 2024 and sell it today you would earn a total of  820.00  from holding Hi Tech Lubricants or generate 20.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.32%
Values	Daily Returns

Hi Tech Lubricants  vs.  First Credit And

Hi Tech Lubricants

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hi Tech Lubricants are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Hi Tech reported solid returns over the last few months and may actually be approaching a breakup point.

First Credit And

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Credit And are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, First Credit disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hi Tech and First Credit

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

The idea behind Hi Tech Lubricants and First Credit 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.