Correlation Between Hitech and Sarthak Metals

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

Diversification Opportunities for Hitech and Sarthak Metals

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Hitech and Sarthak is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Hitech Limited and Sarthak Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarthak Metals and Hitech 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 Hitech Limited are associated (or correlated) with Sarthak Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarthak Metals has no effect on the direction of Hitech i.e., Hitech and Sarthak Metals go up and down completely randomly.

Pair Corralation between Hitech and Sarthak Metals

Assuming the 90 days trading horizon Hitech Limited is expected to generate 1.16 times more return on investment than Sarthak Metals. However, Hitech is 1.16 times more volatile than Sarthak Metals Limited. It trades about -0.1 of its potential returns per unit of risk. Sarthak Metals Limited is currently generating about -0.19 per unit of risk. If you would invest  20,387  in Hitech Limited on November 28, 2024 and sell it today you would lose (1,701) from holding Hitech Limited or give up 8.34% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

Hitech Limited  vs.  Sarthak Metals Limited

 Performance 
       Timeline  
Hitech Limited 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Hitech Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Sarthak Metals 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Sarthak Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Hitech and Sarthak Metals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hitech and Sarthak Metals

The main advantage of trading using opposite Hitech and Sarthak Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hitech position performs unexpectedly, Sarthak Metals 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 Sarthak Metals will offset losses from the drop in Sarthak Metals' long position.
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The idea behind Hitech Limited and Sarthak Metals 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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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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