Correlation Between Prakash Steelage and HCL Technologies

Can any of the company-specific risk be diversified away by investing in both Prakash Steelage and HCL Technologies 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 Prakash Steelage and HCL Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prakash Steelage Limited and HCL Technologies Limited, you can compare the effects of market volatilities on Prakash Steelage and HCL Technologies 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 Prakash Steelage with a short position of HCL Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prakash Steelage and HCL Technologies.

Diversification Opportunities for Prakash Steelage and HCL Technologies

0.87

Correlation Coefficient

Prakash Steelage  HCL Technologies

Very poor diversification

The 3 months correlation between Prakash and HCL is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Prakash Steelage Limited and HCL Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCL Technologies and Prakash Steelage 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 Prakash Steelage Limited are associated (or correlated) with HCL Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCL Technologies has no effect on the direction of Prakash Steelage i.e., Prakash Steelage and HCL Technologies go up and down completely randomly.

Pair Corralation between Prakash Steelage and HCL Technologies

Assuming the 90 days trading horizon Prakash Steelage Limited is expected to under-perform the HCL Technologies. In addition to that, Prakash Steelage is 1.42 times more volatile than HCL Technologies Limited. It trades about -0.11 of its total potential returns per unit of risk. HCL Technologies Limited is currently generating about -0.13 per unit of volatility. If you would invest  190,075  in HCL Technologies Limited on December 26, 2024 and sell it today you would lose (27,585) from holding HCL Technologies Limited or give up 14.51% of portfolio value over 90 days.

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

Prakash Steelage Limited  vs.  HCL Technologies Limited

Prakash Steelage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prakash Steelage Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

HCL Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days HCL Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Prakash Steelage and HCL Technologies

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

The idea behind Prakash Steelage Limited and HCL Technologies 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.