Correlation Between VA Tech and HMT
Can any of the company-specific risk be diversified away by investing in both VA Tech and HMT 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 VA Tech and HMT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VA Tech Wabag and HMT Limited, you can compare the effects of market volatilities on VA Tech and HMT 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 VA Tech with a short position of HMT. Check out your portfolio center. Please also check ongoing floating volatility patterns of VA Tech and HMT.
Diversification Opportunities for VA Tech and HMT
Pay attention - limited upside
The 3 months correlation between WABAG and HMT is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding VA Tech Wabag and HMT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMT Limited and VA Tech 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 VA Tech Wabag are associated (or correlated) with HMT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMT Limited has no effect on the direction of VA Tech i.e., VA Tech and HMT go up and down completely randomly.
Pair Corralation between VA Tech and HMT
Assuming the 90 days trading horizon VA Tech Wabag is expected to generate 0.74 times more return on investment than HMT. However, VA Tech Wabag is 1.34 times less risky than HMT. It trades about 0.06 of its potential returns per unit of risk. HMT Limited is currently generating about -0.04 per unit of risk. If you would invest 179,730 in VA Tech Wabag on September 12, 2024 and sell it today you would earn a total of 4,130 from holding VA Tech Wabag or generate 2.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
VA Tech Wabag vs. HMT Limited
Performance |
| Timeline |
| VA Tech Wabag |
| HMT Limited |
VA Tech and HMT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VA Tech and HMT
The main advantage of trading using opposite VA Tech and HMT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VA Tech position performs unexpectedly, HMT 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 HMT will offset losses from the drop in HMT's long position.| VA Tech vs. Reliance Industries Limited | VA Tech vs. Oil Natural Gas | VA Tech vs. Indo Borax Chemicals | VA Tech vs. Kingfa Science Technology |
| HMT vs. Praxis Home Retail | HMT vs. Lakshmi Finance Industrial | HMT vs. Agarwal Industrial | HMT vs. NRB Industrial Bearings |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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