Correlation Between Hub Power and Reliance Weaving

Can any of the company-specific risk be diversified away by investing in both Hub Power and Reliance Weaving 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 Hub Power and Reliance Weaving into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hub Power and Reliance Weaving Mills, you can compare the effects of market volatilities on Hub Power and Reliance Weaving 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 Hub Power with a short position of Reliance Weaving. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hub Power and Reliance Weaving.

Diversification Opportunities for Hub Power and Reliance Weaving

0.22

Correlation Coefficient

Hub Power  Reliance Weaving

Modest diversification

The 3 months correlation between Hub and Reliance is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Hub Power and Reliance Weaving Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Weaving Mills and Hub Power 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 Hub Power are associated (or correlated) with Reliance Weaving. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Weaving Mills has no effect on the direction of Hub Power i.e., Hub Power and Reliance Weaving go up and down completely randomly.

Pair Corralation between Hub Power and Reliance Weaving

Assuming the 90 days trading horizon Hub Power is expected to generate 1.17 times more return on investment than Reliance Weaving. However, Hub Power is 1.17 times more volatile than Reliance Weaving Mills. It trades about 0.17 of its potential returns per unit of risk. Reliance Weaving Mills is currently generating about 0.07 per unit of risk. If you would invest  12,489  in Hub Power on December 30, 2024 and sell it today you would earn a total of  2,143  from holding Hub Power or generate 17.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	66.67%
Values	Daily Returns

Hub Power  vs.  Reliance Weaving Mills

Hub Power

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hub Power are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hub Power sustained solid returns over the last few months and may actually be approaching a breakup point.

Reliance Weaving Mills

Risk-Adjusted Performance

Modest

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

Pair Trading with Hub Power and Reliance Weaving

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

The idea behind Hub Power and Reliance Weaving 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.