Correlation Between Hindustan Construction and Cartrade Tech

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

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

Diversification Opportunities for Hindustan Construction and Cartrade Tech

0.33

Correlation Coefficient

Hindustan Construction  Cartrade Tech

Weak diversification

The 3 months correlation between Hindustan and Cartrade is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Construction and Cartrade Tech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cartrade Tech Limited and Hindustan Construction 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 Hindustan Construction are associated (or correlated) with Cartrade Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cartrade Tech Limited has no effect on the direction of Hindustan Construction i.e., Hindustan Construction and Cartrade Tech go up and down completely randomly.

Pair Corralation between Hindustan Construction and Cartrade Tech

Assuming the 90 days trading horizon Hindustan Construction is expected to generate 1.22 times less return on investment than Cartrade Tech. In addition to that, Hindustan Construction is 1.32 times more volatile than Cartrade Tech Limited. It trades about 0.06 of its total potential returns per unit of risk. Cartrade Tech Limited is currently generating about 0.1 per unit of volatility. If you would invest  46,865  in Cartrade Tech Limited on September 20, 2024 and sell it today you would earn a total of  106,920  from holding Cartrade Tech Limited or generate 228.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.39%
Values	Daily Returns

Hindustan Construction  vs.  Cartrade Tech Limited

Hindustan Construction

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hindustan Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Hindustan Construction is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Cartrade Tech Limited

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cartrade Tech Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cartrade Tech exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hindustan Construction and Cartrade Tech

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

The idea behind Hindustan Construction and Cartrade Tech 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.