Correlation Between Cartrade Tech and HEG

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Can any of the company-specific risk be diversified away by investing in both Cartrade Tech 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 Cartrade Tech and HEG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cartrade Tech Limited and HEG Limited, you can compare the effects of market volatilities on Cartrade Tech 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 Cartrade Tech with a short position of HEG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cartrade Tech and HEG.

Diversification Opportunities for Cartrade Tech and HEG

0.54
  Correlation Coefficient
 HEG

Very weak diversification

The 3 months correlation between Cartrade and HEG is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Cartrade Tech Limited and HEG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEG Limited and Cartrade Tech 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 Cartrade Tech 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 Cartrade Tech i.e., Cartrade Tech and HEG go up and down completely randomly.

Pair Corralation between Cartrade Tech and HEG

Assuming the 90 days trading horizon Cartrade Tech Limited is expected to generate 1.19 times more return on investment than HEG. However, Cartrade Tech is 1.19 times more volatile than HEG Limited. It trades about 0.06 of its potential returns per unit of risk. HEG Limited is currently generating about -0.29 per unit of risk. If you would invest  149,575  in Cartrade Tech Limited on October 11, 2024 and sell it today you would earn a total of  4,770  from holding Cartrade Tech Limited or generate 3.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Cartrade Tech Limited  vs.  HEG Limited

 Performance 
       Timeline  
Cartrade Tech Limited 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Cartrade Tech Limited are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cartrade Tech exhibited solid returns over the last few months and may actually be approaching a breakup point.
HEG Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.

Cartrade Tech and HEG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cartrade Tech and HEG

The main advantage of trading using opposite Cartrade Tech and HEG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cartrade Tech 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.
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The idea behind Cartrade Tech 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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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..

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