Correlation Between HMT and VA Tech
Can any of the company-specific risk be diversified away by investing in both HMT and VA Tech 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 VA Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HMT Limited and VA Tech Wabag, you can compare the effects of market volatilities on HMT and VA Tech 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 VA Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMT and VA Tech.
Diversification Opportunities for HMT and VA Tech
Pay attention - limited upside
The 3 months correlation between HMT and WABAG is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding HMT Limited and VA Tech Wabag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VA Tech Wabag 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 VA Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VA Tech Wabag has no effect on the direction of HMT i.e., HMT and VA Tech go up and down completely randomly.
Pair Corralation between HMT and VA Tech
Assuming the 90 days trading horizon HMT Limited is expected to under-perform the VA Tech. In addition to that, HMT is 1.29 times more volatile than VA Tech Wabag. It trades about -0.03 of its total potential returns per unit of risk. VA Tech Wabag is currently generating about 0.06 per unit of volatility. If you would invest 179,730 in VA Tech Wabag on September 12, 2024 and sell it today you would earn a total of 3,815 from holding VA Tech Wabag or generate 2.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HMT Limited vs. VA Tech Wabag
Performance |
| Timeline |
| HMT Limited |
| VA Tech Wabag |
HMT and VA Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HMT and VA Tech
The main advantage of trading using opposite HMT and VA Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMT position performs unexpectedly, VA Tech 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 VA Tech will offset losses from the drop in VA Tech's long position.| HMT vs. Praxis Home Retail | HMT vs. Lakshmi Finance Industrial | HMT vs. Agarwal Industrial | HMT vs. NRB Industrial Bearings |
| VA Tech vs. Reliance Industries Limited | VA Tech vs. Oil Natural Gas | VA Tech vs. Indo Borax Chemicals | VA Tech vs. Kingfa Science Technology |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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