Correlation Between Hexa Tradex and Patanjali Foods

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

Diversification Opportunities for Hexa Tradex and Patanjali Foods

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between Hexa and Patanjali is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Hexa Tradex Limited and Patanjali Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patanjali Foods and Hexa Tradex 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 Hexa Tradex Limited are associated (or correlated) with Patanjali Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patanjali Foods has no effect on the direction of Hexa Tradex i.e., Hexa Tradex and Patanjali Foods go up and down completely randomly.

Pair Corralation between Hexa Tradex and Patanjali Foods

Assuming the 90 days trading horizon Hexa Tradex Limited is expected to generate 1.06 times more return on investment than Patanjali Foods. However, Hexa Tradex is 1.06 times more volatile than Patanjali Foods Limited. It trades about 0.07 of its potential returns per unit of risk. Patanjali Foods Limited is currently generating about 0.05 per unit of risk. If you would invest  15,500  in Hexa Tradex Limited on September 3, 2024 and sell it today you would earn a total of  14,585  from holding Hexa Tradex Limited or generate 94.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Hexa Tradex Limited  vs.  Patanjali Foods Limited

 Performance 
       Timeline  
Hexa Tradex Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hexa Tradex Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Patanjali Foods 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Patanjali Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Patanjali Foods is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Hexa Tradex and Patanjali Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hexa Tradex and Patanjali Foods

The main advantage of trading using opposite Hexa Tradex and Patanjali Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hexa Tradex position performs unexpectedly, Patanjali Foods 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 Patanjali Foods will offset losses from the drop in Patanjali Foods' long position.
The idea behind Hexa Tradex Limited and Patanjali Foods 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.
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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