Correlation Between Bosch and Hindustan Foods

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

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

Diversification Opportunities for Bosch and Hindustan Foods

0.66

Correlation Coefficient

Bosch  Hindustan Foods

Poor diversification

The 3 months correlation between Bosch and Hindustan is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bosch 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 Bosch 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 Bosch 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 Bosch i.e., Bosch and Hindustan Foods go up and down completely randomly.

Pair Corralation between Bosch and Hindustan Foods

Assuming the 90 days trading horizon Bosch Limited is expected to generate 0.77 times more return on investment than Hindustan Foods. However, Bosch Limited is 1.3 times less risky than Hindustan Foods. It trades about 0.08 of its potential returns per unit of risk. Hindustan Foods Limited is currently generating about -0.02 per unit of risk. If you would invest  3,245,185  in Bosch Limited on September 4, 2024 and sell it today you would earn a total of  247,185  from holding Bosch Limited or generate 7.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Bosch Limited  vs.  Hindustan Foods Limited

Bosch Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bosch Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Bosch may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 somewhat strong technical and fundamental indicators, Hindustan Foods is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bosch and Hindustan Foods

The main advantage of trading using opposite Bosch and Hindustan Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bosch 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 Bosch 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 Global Correlations module to find global opportunities by holding instruments from different markets.