Correlation Between Electronics Mart and HPL Electric
Can any of the company-specific risk be diversified away by investing in both Electronics Mart and HPL Electric 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 Electronics Mart and HPL Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronics Mart India and HPL Electric Power, you can compare the effects of market volatilities on Electronics Mart and HPL Electric 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 Electronics Mart with a short position of HPL Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronics Mart and HPL Electric.
Diversification Opportunities for Electronics Mart and HPL Electric
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Electronics and HPL is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Electronics Mart India and HPL Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HPL Electric Power and Electronics Mart 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 Electronics Mart India are associated (or correlated) with HPL Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HPL Electric Power has no effect on the direction of Electronics Mart i.e., Electronics Mart and HPL Electric go up and down completely randomly.
Pair Corralation between Electronics Mart and HPL Electric
Assuming the 90 days trading horizon Electronics Mart India is expected to under-perform the HPL Electric. But the stock apears to be less risky and, when comparing its historical volatility, Electronics Mart India is 1.6 times less risky than HPL Electric. The stock trades about -0.19 of its potential returns per unit of risk. The HPL Electric Power is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 43,125 in HPL Electric Power on November 29, 2024 and sell it today you would lose (3,730) from holding HPL Electric Power or give up 8.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electronics Mart India vs. HPL Electric Power
Performance |
| Timeline |
| Electronics Mart India |
| HPL Electric Power |
Electronics Mart and HPL Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronics Mart and HPL Electric
The main advantage of trading using opposite Electronics Mart and HPL Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronics Mart position performs unexpectedly, HPL Electric 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 HPL Electric will offset losses from the drop in HPL Electric's long position.| Electronics Mart vs. VIP Clothing Limited | Electronics Mart vs. Teamlease Services Limited | Electronics Mart vs. Rama Steel Tubes | Electronics Mart vs. NMDC Steel Limited |
| HPL Electric vs. Sintex Plastics Technology | HPL Electric vs. ideaForge Technology Limited | HPL Electric vs. Computer Age Management | HPL Electric vs. Heritage Foods Limited |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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