Correlation Between Indus and Hub Power
Can any of the company-specific risk be diversified away by investing in both Indus and Hub Power 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 Indus and Hub Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indus Motor and Hub Power, you can compare the effects of market volatilities on Indus and Hub Power 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 Indus with a short position of Hub Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indus and Hub Power.
Diversification Opportunities for Indus and Hub Power
Excellent diversification
The 3 months correlation between Indus and Hub is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Indus Motor and Hub Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hub Power and Indus 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 Indus Motor are associated (or correlated) with Hub Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hub Power has no effect on the direction of Indus i.e., Indus and Hub Power go up and down completely randomly.
Pair Corralation between Indus and Hub Power
Assuming the 90 days trading horizon Indus Motor is expected to generate 0.61 times more return on investment than Hub Power. However, Indus Motor is 1.65 times less risky than Hub Power. It trades about 0.26 of its potential returns per unit of risk. Hub Power is currently generating about 0.11 per unit of risk. If you would invest 186,283 in Indus Motor on September 1, 2024 and sell it today you would earn a total of 13,741 from holding Indus Motor or generate 7.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Indus Motor vs. Hub Power
Performance |
| Timeline |
| Indus Motor |
| Hub Power |
Indus and Hub Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indus and Hub Power
The main advantage of trading using opposite Indus and Hub Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indus position performs unexpectedly, Hub Power 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 Hub Power will offset losses from the drop in Hub Power's long position.The idea behind Indus Motor and Hub Power 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.| Hub Power vs. Honda Atlas Cars | Hub Power vs. Century Insurance | Hub Power vs. Faysal Bank | Hub Power vs. Crescent Star Insurance |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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