Correlation Between Hi Tech and Habib Sugar

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

Diversification Opportunities for Hi Tech and Habib Sugar

0.86

Correlation Coefficient

Hi Tech  Habib Sugar

Very poor diversification

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

Pair Corralation between Hi Tech and Habib Sugar

Assuming the 90 days trading horizon Hi Tech Lubricants is expected to generate 1.4 times more return on investment than Habib Sugar. However, Hi Tech is 1.4 times more volatile than Habib Sugar Mills. It trades about -0.13 of its potential returns per unit of risk. Habib Sugar Mills is currently generating about -0.26 per unit of risk. If you would invest  5,325  in Hi Tech Lubricants on October 23, 2024 and sell it today you would lose (352.00) from holding Hi Tech Lubricants or give up 6.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.0%
Values	Daily Returns

Hi Tech Lubricants  vs.  Habib Sugar Mills

Hi Tech Lubricants

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hi Tech Lubricants are ranked lower than 9 (%) 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.

Habib Sugar Mills

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Sugar Mills are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Habib Sugar disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hi Tech and Habib Sugar

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

The idea behind Hi Tech Lubricants and Habib Sugar Mills 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.