Correlation Between Aptech and Hindustan Foods

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

By analyzing existing cross correlation between Aptech Limited and Hindustan Foods Limited, you can compare the effects of market volatilities on Aptech and Hindustan Foods 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 Aptech with a short position of Hindustan Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aptech and Hindustan Foods.

Diversification Opportunities for Aptech and Hindustan Foods

0.81

Correlation Coefficient

Aptech  Hindustan Foods

Very poor diversification

The 3 months correlation between Aptech and Hindustan is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Aptech Limited and Hindustan Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindustan Foods and Aptech 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 Aptech Limited are associated (or correlated) with Hindustan Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindustan Foods has no effect on the direction of Aptech i.e., Aptech and Hindustan Foods go up and down completely randomly.

Pair Corralation between Aptech and Hindustan Foods

Assuming the 90 days trading horizon Aptech Limited is expected to generate 1.93 times more return on investment than Hindustan Foods. However, Aptech is 1.93 times more volatile than Hindustan Foods Limited. It trades about 0.15 of its potential returns per unit of risk. Hindustan Foods Limited is currently generating about -0.17 per unit of risk. If you would invest  17,217  in Aptech Limited on September 28, 2024 and sell it today you would earn a total of  1,627  from holding Aptech Limited or generate 9.45% return on investment over 90 days.

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

Aptech Limited  vs.  Hindustan Foods Limited

Aptech Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aptech Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental 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.

Hindustan Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindustan Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Aptech and Hindustan Foods

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

The idea behind Aptech Limited and Hindustan Foods 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.