Correlation Between Tech Mahindra and HMT
Can any of the company-specific risk be diversified away by investing in both Tech Mahindra and HMT 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 Tech Mahindra and HMT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tech Mahindra Limited and HMT Limited, you can compare the effects of market volatilities on Tech Mahindra and HMT 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 Tech Mahindra with a short position of HMT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tech Mahindra and HMT.
Diversification Opportunities for Tech Mahindra and HMT
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tech and HMT is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Tech Mahindra Limited and HMT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMT Limited and Tech Mahindra 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 Tech Mahindra Limited are associated (or correlated) with HMT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMT Limited has no effect on the direction of Tech Mahindra i.e., Tech Mahindra and HMT go up and down completely randomly.
Pair Corralation between Tech Mahindra and HMT
Assuming the 90 days trading horizon Tech Mahindra Limited is expected to generate 0.61 times more return on investment than HMT. However, Tech Mahindra Limited is 1.64 times less risky than HMT. It trades about -0.19 of its potential returns per unit of risk. HMT Limited is currently generating about -0.2 per unit of risk. If you would invest 172,695 in Tech Mahindra Limited on December 2, 2024 and sell it today you would lose (23,910) from holding Tech Mahindra Limited or give up 13.85% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Tech Mahindra Limited vs. HMT Limited
Performance |
Timeline |
Tech Mahindra Limited |
HMT Limited |
Tech Mahindra and HMT Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Tech Mahindra and HMT
The main advantage of trading using opposite Tech Mahindra and HMT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tech Mahindra position performs unexpectedly, HMT 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 HMT will offset losses from the drop in HMT's long position.Tech Mahindra vs. Mtar Technologies Limited | Tech Mahindra vs. Star Health and | Tech Mahindra vs. Varun Beverages Limited | Tech Mahindra vs. PNC Infratech Limited |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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