Correlation Between Malu Paper and Hindustan Foods

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

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

Diversification Opportunities for Malu Paper and Hindustan Foods

0.27

Correlation Coefficient

Malu Paper  Hindustan Foods

Modest diversification

The 3 months correlation between Malu and Hindustan is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Malu Paper Mills and Hindustan Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindustan Foods and Malu Paper 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 Malu Paper Mills are associated (or correlated) with Hindustan Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindustan Foods has no effect on the direction of Malu Paper i.e., Malu Paper and Hindustan Foods go up and down completely randomly.

Pair Corralation between Malu Paper and Hindustan Foods

Assuming the 90 days trading horizon Malu Paper Mills is expected to under-perform the Hindustan Foods. In addition to that, Malu Paper is 1.06 times more volatile than Hindustan Foods Limited. It trades about -0.24 of its total potential returns per unit of risk. Hindustan Foods Limited is currently generating about -0.05 per unit of volatility. If you would invest  57,740  in Hindustan Foods Limited on December 4, 2024 and sell it today you would lose (5,460) from holding Hindustan Foods Limited or give up 9.46% of portfolio value over 90 days.

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

Malu Paper Mills  vs.  Hindustan Foods Limited

Malu Paper Mills

Risk-Adjusted Performance

Very Weak

Over the last 90 days Malu Paper Mills has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Hindustan Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hindustan Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Malu Paper and Hindustan Foods

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

The idea behind Malu Paper Mills and Hindustan Foods 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.