Correlation Between Salzer Electronics and Hilton Metal

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

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

Diversification Opportunities for Salzer Electronics and Hilton Metal

0.88

Correlation Coefficient

Salzer Electronics  Hilton Metal

Very poor diversification

The 3 months correlation between Salzer and Hilton is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Salzer Electronics Limited 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 Salzer Electronics 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 Salzer Electronics Limited 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 Salzer Electronics i.e., Salzer Electronics and Hilton Metal go up and down completely randomly.

Pair Corralation between Salzer Electronics and Hilton Metal

Assuming the 90 days trading horizon Salzer Electronics Limited is expected to generate 1.13 times more return on investment than Hilton Metal. However, Salzer Electronics is 1.13 times more volatile than Hilton Metal Forging. It trades about 0.09 of its potential returns per unit of risk. Hilton Metal Forging is currently generating about 0.06 per unit of risk. If you would invest  116,995  in Salzer Electronics Limited on October 15, 2024 and sell it today you would earn a total of  20,175  from holding Salzer Electronics Limited or generate 17.24% return on investment over 90 days.

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

Salzer Electronics Limited  vs.  Hilton Metal Forging

Salzer Electronics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Salzer Electronics Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Salzer Electronics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hilton Metal Forging

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Hilton Metal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Salzer Electronics and Hilton Metal

The main advantage of trading using opposite Salzer Electronics and Hilton Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salzer Electronics 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 Salzer Electronics Limited 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.