Correlation Between Shemaroo Entertainment and Hindustan Foods

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

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

Diversification Opportunities for Shemaroo Entertainment and Hindustan Foods

0.68

Correlation Coefficient

Shemaroo Entertainment  Hindustan Foods

Poor diversification

The 3 months correlation between Shemaroo and Hindustan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Shemaroo Entertainment Limited and Hindustan Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindustan Foods and Shemaroo Entertainment 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 Shemaroo Entertainment Limited are associated (or correlated) with Hindustan Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindustan Foods has no effect on the direction of Shemaroo Entertainment i.e., Shemaroo Entertainment and Hindustan Foods go up and down completely randomly.

Pair Corralation between Shemaroo Entertainment and Hindustan Foods

Assuming the 90 days trading horizon Shemaroo Entertainment Limited is expected to generate 1.77 times more return on investment than Hindustan Foods. However, Shemaroo Entertainment is 1.77 times more volatile than Hindustan Foods Limited. It trades about 0.03 of its potential returns per unit of risk. Hindustan Foods Limited is currently generating about -0.01 per unit of risk. If you would invest  16,134  in Shemaroo Entertainment Limited on August 31, 2024 and sell it today you would earn a total of  489.00  from holding Shemaroo Entertainment Limited or generate 3.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Shemaroo Entertainment Limited  vs.  Hindustan Foods Limited

Shemaroo Entertainment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shemaroo Entertainment Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Shemaroo Entertainment may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Hindustan Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindustan Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Hindustan Foods is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shemaroo Entertainment and Hindustan Foods

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

The idea behind Shemaroo Entertainment Limited and Hindustan Foods 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.