Correlation Between Indian Energy and Hindustan Copper

Can any of the company-specific risk be diversified away by investing in both Indian Energy and Hindustan Copper 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 Indian Energy and Hindustan Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indian Energy Exchange and Hindustan Copper Limited, you can compare the effects of market volatilities on Indian Energy and Hindustan Copper 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 Indian Energy with a short position of Hindustan Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Energy and Hindustan Copper.

Diversification Opportunities for Indian Energy and Hindustan Copper

0.73

Correlation Coefficient

Indian Energy  Hindustan Copper

Poor diversification

The 3 months correlation between Indian and Hindustan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Indian Energy Exchange and Hindustan Copper Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindustan Copper and Indian Energy 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 Indian Energy Exchange are associated (or correlated) with Hindustan Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindustan Copper has no effect on the direction of Indian Energy i.e., Indian Energy and Hindustan Copper go up and down completely randomly.

Pair Corralation between Indian Energy and Hindustan Copper

Assuming the 90 days trading horizon Indian Energy Exchange is expected to generate 0.83 times more return on investment than Hindustan Copper. However, Indian Energy Exchange is 1.2 times less risky than Hindustan Copper. It trades about 0.01 of its potential returns per unit of risk. Hindustan Copper Limited is currently generating about -0.06 per unit of risk. If you would invest  17,871  in Indian Energy Exchange on December 27, 2024 and sell it today you would lose (155.00) from holding Indian Energy Exchange or give up 0.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Indian Energy Exchange  vs.  Hindustan Copper Limited

Indian Energy Exchange

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indian Energy Exchange has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Indian Energy is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Hindustan Copper

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hindustan Copper Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent 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.

Pair Trading with Indian Energy and Hindustan Copper

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

The idea behind Indian Energy Exchange and Hindustan Copper Limited 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.