Correlation Between International Steels and Hi Tech
Can any of the company-specific risk be diversified away by investing in both International Steels 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 International Steels and Hi Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Steels and Hi Tech Lubricants, you can compare the effects of market volatilities on International Steels 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 International Steels with a short position of Hi Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Steels and Hi Tech.
Diversification Opportunities for International Steels and Hi Tech
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and HTL is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding International Steels and Hi Tech Lubricants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Tech Lubricants and International Steels 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 International Steels 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 Lubricants has no effect on the direction of International Steels i.e., International Steels and Hi Tech go up and down completely randomly.
Pair Corralation between International Steels and Hi Tech
Assuming the 90 days trading horizon International Steels is expected to generate 1.32 times less return on investment than Hi Tech. But when comparing it to its historical volatility, International Steels is 1.36 times less risky than Hi Tech. It trades about 0.09 of its potential returns per unit of risk. Hi Tech Lubricants is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,412 in Hi Tech Lubricants on October 25, 2024 and sell it today you would earn a total of 2,365 from holding Hi Tech Lubricants or generate 98.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Steels vs. Hi Tech Lubricants
Performance |
| Timeline |
| International Steels |
| Hi Tech Lubricants |
International Steels and Hi Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Steels and Hi Tech
The main advantage of trading using opposite International Steels and Hi Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Steels 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.| International Steels vs. JS Investments | International Steels vs. Bank of Punjab | International Steels vs. Sardar Chemical Industries | International Steels vs. Synthetic Products Enterprises |
| Hi Tech vs. Avanceon | Hi Tech vs. TPL Insurance | Hi Tech vs. Crescent Star Insurance | Hi Tech vs. JS Investments |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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