Correlation Between Eros International and Hindustan Media

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

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

Diversification Opportunities for Eros International and Hindustan Media

0.25

Correlation Coefficient

Eros International  Hindustan Media

Modest diversification

The 3 months correlation between Eros and Hindustan is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Eros International Media and Hindustan Media Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindustan Media Ventures and Eros International 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 Eros International Media are associated (or correlated) with Hindustan Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindustan Media Ventures has no effect on the direction of Eros International i.e., Eros International and Hindustan Media go up and down completely randomly.

Pair Corralation between Eros International and Hindustan Media

Assuming the 90 days trading horizon Eros International Media is expected to under-perform the Hindustan Media. In addition to that, Eros International is 1.08 times more volatile than Hindustan Media Ventures. It trades about -0.02 of its total potential returns per unit of risk. Hindustan Media Ventures is currently generating about 0.05 per unit of volatility. If you would invest  5,540  in Hindustan Media Ventures on September 30, 2024 and sell it today you would earn a total of  3,744  from holding Hindustan Media Ventures or generate 67.58% return on investment over 90 days.

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

Eros International Media  vs.  Hindustan Media Ventures

Eros International Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eros International Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Hindustan Media Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindustan Media Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hindustan Media is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Eros International and Hindustan Media

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

The idea behind Eros International Media and Hindustan Media Ventures 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.