Correlation Between SDI Corp and Hota Industrial

Can any of the company-specific risk be diversified away by investing in both SDI Corp and Hota Industrial 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 SDI Corp and Hota Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SDI Corp and Hota Industrial Mfg, you can compare the effects of market volatilities on SDI Corp and Hota Industrial 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 SDI Corp with a short position of Hota Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of SDI Corp and Hota Industrial.

Diversification Opportunities for SDI Corp and Hota Industrial

-0.17

Correlation Coefficient

SDI Corp  Hota Industrial

Good diversification

The 3 months correlation between SDI and Hota is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding SDI Corp and Hota Industrial Mfg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hota Industrial Mfg and SDI Corp 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 SDI Corp are associated (or correlated) with Hota Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hota Industrial Mfg has no effect on the direction of SDI Corp i.e., SDI Corp and Hota Industrial go up and down completely randomly.

Pair Corralation between SDI Corp and Hota Industrial

Assuming the 90 days trading horizon SDI Corp is expected to under-perform the Hota Industrial. In addition to that, SDI Corp is 1.11 times more volatile than Hota Industrial Mfg. It trades about -0.06 of its total potential returns per unit of risk. Hota Industrial Mfg is currently generating about 0.05 per unit of volatility. If you would invest  5,670  in Hota Industrial Mfg on September 3, 2024 and sell it today you would earn a total of  790.00  from holding Hota Industrial Mfg or generate 13.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SDI Corp  vs.  Hota Industrial Mfg

SDI Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SDI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Hota Industrial Mfg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hota Industrial Mfg has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hota Industrial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SDI Corp and Hota Industrial

The main advantage of trading using opposite SDI Corp and Hota Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SDI Corp position performs unexpectedly, Hota Industrial 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 Hota Industrial will offset losses from the drop in Hota Industrial's long position.

The idea behind SDI Corp and Hota Industrial Mfg 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.