Correlation Between Hi Tech and Millat Tractors

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

Diversification Opportunities for Hi Tech and Millat Tractors

0.08

Correlation Coefficient

Hi Tech  Millat Tractors

Significant diversification

The 3 months correlation between HTL and Millat is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hi Tech Lubricants and Millat Tractors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Millat Tractors 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 Millat Tractors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Millat Tractors has no effect on the direction of Hi Tech i.e., Hi Tech and Millat Tractors go up and down completely randomly.

Pair Corralation between Hi Tech and Millat Tractors

Assuming the 90 days trading horizon Hi Tech Lubricants is expected to under-perform the Millat Tractors. But the stock apears to be less risky and, when comparing its historical volatility, Hi Tech Lubricants is 1.02 times less risky than Millat Tractors. The stock trades about -0.06 of its potential returns per unit of risk. The Millat Tractors is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  56,513  in Millat Tractors on December 20, 2024 and sell it today you would earn a total of  2,305  from holding Millat Tractors or generate 4.08% return on investment over 90 days.

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

Hi Tech Lubricants  vs.  Millat Tractors

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 latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Millat Tractors

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Millat Tractors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Millat Tractors may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hi Tech and Millat Tractors

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

The idea behind Hi Tech Lubricants and Millat Tractors 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.