Correlation Between Fortis Healthcare and Hindustan Foods

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

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

Diversification Opportunities for Fortis Healthcare and Hindustan Foods

-0.66

Correlation Coefficient

Fortis Healthcare  Hindustan Foods

Excellent diversification

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

Pair Corralation between Fortis Healthcare and Hindustan Foods

Assuming the 90 days trading horizon Fortis Healthcare Limited is expected to generate 1.01 times more return on investment than Hindustan Foods. However, Fortis Healthcare is 1.01 times more volatile than Hindustan Foods Limited. It trades about 0.13 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  64,560  in Fortis Healthcare Limited on September 28, 2024 and sell it today you would earn a total of  2,660  from holding Fortis Healthcare Limited or generate 4.12% return on investment over 90 days.

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

Fortis Healthcare Limited  vs.  Hindustan Foods Limited

Fortis Healthcare

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fortis Healthcare Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Fortis Healthcare 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 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 Fortis Healthcare and Hindustan Foods

The main advantage of trading using opposite Fortis Healthcare and Hindustan Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortis Healthcare 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 Fortis Healthcare 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..