Correlation Between Rico Auto and HMT

Can any of the company-specific risk be diversified away by investing in both Rico Auto and HMT 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 HMT 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 HMT Limited, you can compare the effects of market volatilities on Rico Auto and HMT 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 HMT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rico Auto and HMT.

Diversification Opportunities for Rico Auto and HMT

0.95

Correlation Coefficient

Rico Auto  HMT

Almost no diversification

The 3 months correlation between Rico and HMT is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and HMT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMT Limited 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 HMT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMT Limited has no effect on the direction of Rico Auto i.e., Rico Auto and HMT go up and down completely randomly.

Pair Corralation between Rico Auto and HMT

Assuming the 90 days trading horizon Rico Auto Industries is expected to under-perform the HMT. But the stock apears to be less risky and, when comparing its historical volatility, Rico Auto Industries is 1.5 times less risky than HMT. The stock trades about -0.01 of its potential returns per unit of risk. The HMT Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,194  in HMT Limited on September 23, 2024 and sell it today you would earn a total of  189.00  from holding HMT Limited or generate 3.05% return on investment over 90 days.

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

Rico Auto Industries  vs.  HMT Limited

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.

HMT Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMT Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Rico Auto and HMT

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

The idea behind Rico Auto Industries and HMT 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.