Correlation Between Hemisphere Properties and Elgi Rubber

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

Diversification Opportunities for Hemisphere Properties and Elgi Rubber

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Hemisphere and Elgi is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Hemisphere Properties India and Elgi Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elgi Rubber and Hemisphere Properties 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 Hemisphere Properties India are associated (or correlated) with Elgi Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elgi Rubber has no effect on the direction of Hemisphere Properties i.e., Hemisphere Properties and Elgi Rubber go up and down completely randomly.

Pair Corralation between Hemisphere Properties and Elgi Rubber

Assuming the 90 days trading horizon Hemisphere Properties is expected to generate 2.18 times less return on investment than Elgi Rubber. But when comparing it to its historical volatility, Hemisphere Properties India is 1.3 times less risky than Elgi Rubber. It trades about 0.04 of its potential returns per unit of risk. Elgi Rubber is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,530  in Elgi Rubber on August 29, 2024 and sell it today you would earn a total of  6,218  from holding Elgi Rubber or generate 176.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy99.59%
ValuesDaily Returns

Hemisphere Properties India  vs.  Elgi Rubber

 Performance 
       Timeline  
Hemisphere Properties 

Risk-Adjusted Performance

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Over the last 90 days Hemisphere Properties India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
Elgi Rubber 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Elgi Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Elgi Rubber is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Hemisphere Properties and Elgi Rubber Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hemisphere Properties and Elgi Rubber

The main advantage of trading using opposite Hemisphere Properties and Elgi Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hemisphere Properties position performs unexpectedly, Elgi Rubber 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 Elgi Rubber will offset losses from the drop in Elgi Rubber's long position.
The idea behind Hemisphere Properties India and Elgi Rubber 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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