Correlation Between HMT and Cambridge Technology
Can any of the company-specific risk be diversified away by investing in both HMT and Cambridge Technology 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 HMT and Cambridge Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HMT Limited and Cambridge Technology Enterprises, you can compare the effects of market volatilities on HMT and Cambridge Technology 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 HMT with a short position of Cambridge Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMT and Cambridge Technology.
Diversification Opportunities for HMT and Cambridge Technology
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HMT and Cambridge is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding HMT Limited and Cambridge Technology Enterpris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambridge Technology and HMT 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 HMT Limited are associated (or correlated) with Cambridge Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambridge Technology has no effect on the direction of HMT i.e., HMT and Cambridge Technology go up and down completely randomly.
Pair Corralation between HMT and Cambridge Technology
Assuming the 90 days trading horizon HMT Limited is expected to under-perform the Cambridge Technology. But the stock apears to be less risky and, when comparing its historical volatility, HMT Limited is 1.27 times less risky than Cambridge Technology. The stock trades about -0.03 of its potential returns per unit of risk. The Cambridge Technology Enterprises is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 9,507 in Cambridge Technology Enterprises on September 12, 2024 and sell it today you would earn a total of 1,357 from holding Cambridge Technology Enterprises or generate 14.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HMT Limited vs. Cambridge Technology Enterpris
Performance |
| Timeline |
| HMT Limited |
| Cambridge Technology |
HMT and Cambridge Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HMT and Cambridge Technology
The main advantage of trading using opposite HMT and Cambridge Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMT position performs unexpectedly, Cambridge Technology 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 Cambridge Technology will offset losses from the drop in Cambridge Technology's long position.| HMT vs. Praxis Home Retail | HMT vs. Lakshmi Finance Industrial | HMT vs. Agarwal Industrial | HMT vs. NRB Industrial Bearings |
| Cambridge Technology vs. Reliance Industries Limited | Cambridge Technology vs. Oil Natural Gas | Cambridge Technology vs. Indian Oil | Cambridge Technology vs. HDFC Bank 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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