Correlation Between Sarthak Metals and HEG

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

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

Diversification Opportunities for Sarthak Metals and HEG

0.05

Correlation Coefficient

Sarthak Metals  HEG

Significant diversification

The 3 months correlation between Sarthak and HEG is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Sarthak Metals Limited and HEG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEG Limited and Sarthak Metals 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 Sarthak Metals Limited are associated (or correlated) with HEG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEG Limited has no effect on the direction of Sarthak Metals i.e., Sarthak Metals and HEG go up and down completely randomly.

Pair Corralation between Sarthak Metals and HEG

Assuming the 90 days trading horizon Sarthak Metals Limited is expected to generate 1.19 times more return on investment than HEG. However, Sarthak Metals is 1.19 times more volatile than HEG Limited. It trades about 0.07 of its potential returns per unit of risk. HEG Limited is currently generating about -0.35 per unit of risk. If you would invest  15,756  in Sarthak Metals Limited on October 23, 2024 and sell it today you would earn a total of  520.00  from holding Sarthak Metals Limited or generate 3.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Sarthak Metals Limited  vs.  HEG Limited

Sarthak Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarthak Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sarthak Metals is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

HEG Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEG Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, HEG is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sarthak Metals and HEG

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

The idea behind Sarthak Metals Limited and HEG 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.