Correlation Between Hindustan Construction and Styrenix Performance

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

By analyzing existing cross correlation between Hindustan Construction and Styrenix Performance Materials, you can compare the effects of market volatilities on Hindustan Construction and Styrenix Performance 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 Styrenix Performance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hindustan Construction and Styrenix Performance.

Diversification Opportunities for Hindustan Construction and Styrenix Performance

0.66

Correlation Coefficient

Hindustan Construction  Styrenix Performance

Poor diversification

The 3 months correlation between Hindustan and Styrenix is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Construction and Styrenix Performance Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Styrenix Performance 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 Styrenix Performance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Styrenix Performance has no effect on the direction of Hindustan Construction i.e., Hindustan Construction and Styrenix Performance go up and down completely randomly.

Pair Corralation between Hindustan Construction and Styrenix Performance

Assuming the 90 days trading horizon Hindustan Construction is expected to generate 1.16 times less return on investment than Styrenix Performance. In addition to that, Hindustan Construction is 1.65 times more volatile than Styrenix Performance Materials. It trades about 0.3 of its total potential returns per unit of risk. Styrenix Performance Materials is currently generating about 0.57 per unit of volatility. If you would invest  241,023  in Styrenix Performance Materials on September 21, 2024 and sell it today you would earn a total of  64,907  from holding Styrenix Performance Materials or generate 26.93% return on investment over 90 days.

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

Hindustan Construction  vs.  Styrenix Performance Materials

Hindustan Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindustan Construction has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Styrenix Performance

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Styrenix Performance Materials are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Styrenix Performance demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hindustan Construction and Styrenix Performance

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

The idea behind Hindustan Construction and Styrenix Performance Materials 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.