Correlation Between Indian Metals and Hi Tech

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Can any of the company-specific risk be diversified away by investing in both Indian Metals and Hi 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 Indian Metals and Hi Tech 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 The Hi Tech Gears, you can compare the effects of market volatilities on Indian Metals and Hi 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 Indian Metals with a short position of Hi Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Metals and Hi Tech.

Diversification Opportunities for Indian Metals and Hi Tech

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Indian and HITECHGEAR is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and The Hi Tech Gears in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Tech 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 Hi Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Tech has no effect on the direction of Indian Metals i.e., Indian Metals and Hi Tech go up and down completely randomly.

Pair Corralation between Indian Metals and Hi Tech

Assuming the 90 days trading horizon Indian Metals Ferro is expected to under-perform the Hi Tech. In addition to that, Indian Metals is 1.88 times more volatile than The Hi Tech Gears. It trades about -0.29 of its total potential returns per unit of risk. The Hi Tech Gears is currently generating about -0.45 per unit of volatility. If you would invest  84,800  in The Hi Tech Gears on November 4, 2024 and sell it today you would lose (15,305) from holding The Hi Tech Gears or give up 18.05% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Indian Metals Ferro  vs.  The Hi Tech Gears

 Performance 
       Timeline  
Indian Metals Ferro 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indian Metals may actually be approaching a critical reversion point that can send shares even higher in March 2025.
Hi Tech 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days The Hi Tech Gears has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Indian Metals and Hi Tech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Indian Metals and Hi Tech

The main advantage of trading using opposite Indian Metals and Hi Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Metals position performs unexpectedly, Hi 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 Hi Tech will offset losses from the drop in Hi Tech's long position.
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The idea behind Indian Metals Ferro and The Hi Tech Gears 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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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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