Correlation Between Sapphire Foods and Hilton Metal

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

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

Diversification Opportunities for Sapphire Foods and Hilton Metal

0.07

Correlation Coefficient

Sapphire Foods  Hilton Metal

Significant diversification

The 3 months correlation between Sapphire and Hilton is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sapphire Foods India 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 Sapphire Foods 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 Sapphire Foods India 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 Sapphire Foods i.e., Sapphire Foods and Hilton Metal go up and down completely randomly.

Pair Corralation between Sapphire Foods and Hilton Metal

Assuming the 90 days trading horizon Sapphire Foods is expected to generate 9.08 times less return on investment than Hilton Metal. But when comparing it to its historical volatility, Sapphire Foods India is 1.79 times less risky than Hilton Metal. It trades about 0.07 of its potential returns per unit of risk. Hilton Metal Forging is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  9,053  in Hilton Metal Forging on October 8, 2024 and sell it today you would earn a total of  2,374  from holding Hilton Metal Forging or generate 26.22% return on investment over 90 days.

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

Sapphire Foods India  vs.  Hilton Metal Forging

Sapphire Foods India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapphire Foods India has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Sapphire Foods is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Hilton Metal Forging

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Hilton Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sapphire Foods and Hilton Metal

The main advantage of trading using opposite Sapphire Foods and Hilton Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sapphire Foods 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 Sapphire Foods India 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.