Correlation Between Transport and Hilton Metal

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

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

Diversification Opportunities for Transport and Hilton Metal

0.29

Correlation Coefficient

Transport  Hilton Metal

Modest diversification

The 3 months correlation between Transport and Hilton is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Transport of 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 Transport 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 Transport of 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 Transport i.e., Transport and Hilton Metal go up and down completely randomly.

Pair Corralation between Transport and Hilton Metal

Assuming the 90 days trading horizon Transport of is expected to generate 0.99 times more return on investment than Hilton Metal. However, Transport of is 1.01 times less risky than Hilton Metal. It trades about -0.01 of its potential returns per unit of risk. Hilton Metal Forging is currently generating about -0.04 per unit of risk. If you would invest  109,875  in Transport of on September 3, 2024 and sell it today you would lose (3,015) from holding Transport of or give up 2.74% of portfolio value over 90 days.

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

Transport of  vs.  Hilton Metal Forging

Transport

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hilton Metal Forging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hilton Metal Forging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Transport and Hilton Metal

The main advantage of trading using opposite Transport and Hilton Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transport 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 Transport of 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..