Correlation Between Indian Metals and HEG
Can any of the company-specific risk be diversified away by investing in both Indian Metals and HEG 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 Indian Metals and HEG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indian Metals Ferro and HEG Limited, you can compare the effects of market volatilities on Indian Metals and HEG 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 Indian Metals with a short position of HEG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Metals and HEG.
Diversification Opportunities for Indian Metals and HEG
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Indian and HEG is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and HEG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEG Limited and Indian Metals 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 Indian Metals Ferro are associated (or correlated) with HEG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEG Limited has no effect on the direction of Indian Metals i.e., Indian Metals and HEG go up and down completely randomly.
Pair Corralation between Indian Metals and HEG
Assuming the 90 days trading horizon Indian Metals Ferro is expected to under-perform the HEG. But the stock apears to be less risky and, when comparing its historical volatility, Indian Metals Ferro is 1.09 times less risky than HEG. The stock trades about -0.16 of its potential returns per unit of risk. The HEG Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 37,695 in HEG Limited on December 8, 2024 and sell it today you would earn a total of 1,705 from holding HEG Limited or generate 4.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indian Metals Ferro vs. HEG Limited
Performance |
| Timeline |
| Indian Metals Ferro |
| HEG Limited |
Indian Metals and HEG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indian Metals and HEG
The main advantage of trading using opposite Indian Metals and HEG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Metals position performs unexpectedly, HEG 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 HEG will offset losses from the drop in HEG's long position.| Indian Metals vs. Vidhi Specialty Food | ||
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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