Correlation Between Rico Auto and Hilton Metal

Can any of the company-specific risk be diversified away by investing in both Rico Auto and Hilton Metal 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 Rico Auto and Hilton Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rico Auto Industries and Hilton Metal Forging, you can compare the effects of market volatilities on Rico Auto and Hilton Metal 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 Rico Auto with a short position of Hilton Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rico Auto and Hilton Metal.

Diversification Opportunities for Rico Auto and Hilton Metal

-0.13

Correlation Coefficient

Rico Auto  Hilton Metal

Good diversification

The 3 months correlation between Rico and Hilton is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and Hilton Metal Forging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Metal Forging and Rico Auto 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 Rico Auto Industries are associated (or correlated) with Hilton Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Metal Forging has no effect on the direction of Rico Auto i.e., Rico Auto and Hilton Metal go up and down completely randomly.

Pair Corralation between Rico Auto and Hilton Metal

Assuming the 90 days trading horizon Rico Auto Industries is expected to generate 0.98 times more return on investment than Hilton Metal. However, Rico Auto Industries is 1.02 times less risky than Hilton Metal. It trades about 0.01 of its potential returns per unit of risk. Hilton Metal Forging is currently generating about -0.03 per unit of risk. If you would invest  9,366  in Rico Auto Industries on September 23, 2024 and sell it today you would lose (850.00) from holding Rico Auto Industries or give up 9.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.88%
Values	Daily Returns

Rico Auto Industries  vs.  Hilton Metal Forging

Rico Auto Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rico Auto Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Hilton Metal Forging

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Hilton Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rico Auto and Hilton Metal

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

The idea behind Rico Auto Industries and Hilton Metal Forging 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.