Correlation Between Zenith Steel and HFCL

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Can any of the company-specific risk be diversified away by investing in both Zenith Steel and HFCL 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 Zenith Steel and HFCL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zenith Steel Pipes and HFCL Limited, you can compare the effects of market volatilities on Zenith Steel and HFCL 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 Zenith Steel with a short position of HFCL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zenith Steel and HFCL.

Diversification Opportunities for Zenith Steel and HFCL

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between Zenith and HFCL is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Zenith Steel Pipes and HFCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HFCL Limited and Zenith Steel 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 Zenith Steel Pipes are associated (or correlated) with HFCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HFCL Limited has no effect on the direction of Zenith Steel i.e., Zenith Steel and HFCL go up and down completely randomly.

Pair Corralation between Zenith Steel and HFCL

Assuming the 90 days trading horizon Zenith Steel Pipes is expected to generate 1.09 times more return on investment than HFCL. However, Zenith Steel is 1.09 times more volatile than HFCL Limited. It trades about 0.05 of its potential returns per unit of risk. HFCL Limited is currently generating about 0.05 per unit of risk. If you would invest  550.00  in Zenith Steel Pipes on September 5, 2024 and sell it today you would earn a total of  349.00  from holding Zenith Steel Pipes or generate 63.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.8%
ValuesDaily Returns

Zenith Steel Pipes  vs.  HFCL Limited

 Performance 
       Timeline  
Zenith Steel Pipes 

Risk-Adjusted Performance

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Over the last 90 days Zenith Steel Pipes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
HFCL Limited 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days HFCL Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Zenith Steel and HFCL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Zenith Steel and HFCL

The main advantage of trading using opposite Zenith Steel and HFCL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zenith Steel position performs unexpectedly, HFCL 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 HFCL will offset losses from the drop in HFCL's long position.
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The idea behind Zenith Steel Pipes and HFCL Limited 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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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 Stocks Directory module to find actively traded stocks across global markets.

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