Correlation Between Hindustan Construction and Syrma SGS

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Can any of the company-specific risk be diversified away by investing in both Hindustan Construction and Syrma SGS 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 Syrma SGS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hindustan Construction and Syrma SGS Technology, you can compare the effects of market volatilities on Hindustan Construction and Syrma SGS 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 Syrma SGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hindustan Construction and Syrma SGS.

Diversification Opportunities for Hindustan Construction and Syrma SGS

HindustanSyrmaDiversified AwayHindustanSyrmaDiversified Away100%
0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Hindustan and Syrma is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Construction and Syrma SGS Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Syrma SGS Technology 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 Syrma SGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Syrma SGS Technology has no effect on the direction of Hindustan Construction i.e., Hindustan Construction and Syrma SGS go up and down completely randomly.

Pair Corralation between Hindustan Construction and Syrma SGS

Assuming the 90 days trading horizon Hindustan Construction is expected to under-perform the Syrma SGS. But the stock apears to be less risky and, when comparing its historical volatility, Hindustan Construction is 1.02 times less risky than Syrma SGS. The stock trades about -0.03 of its potential returns per unit of risk. The Syrma SGS Technology is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  45,110  in Syrma SGS Technology on September 26, 2024 and sell it today you would earn a total of  14,840  from holding Syrma SGS Technology or generate 32.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Hindustan Construction  vs.  Syrma SGS Technology

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -100102030
JavaScript chart by amCharts 3.21.15HCC SYRMA
       Timeline  
Hindustan Construction 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec36384042444648
Syrma SGS Technology 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Syrma SGS Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Syrma SGS displayed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec400450500550600

Hindustan Construction and Syrma SGS Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.45-4.08-2.71-1.340.01.312.643.975.3 0.0280.0290.0300.0310.0320.0330.0340.035
JavaScript chart by amCharts 3.21.15HCC SYRMA
       Returns  

Pair Trading with Hindustan Construction and Syrma SGS

The main advantage of trading using opposite Hindustan Construction and Syrma SGS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hindustan Construction position performs unexpectedly, Syrma SGS 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 Syrma SGS will offset losses from the drop in Syrma SGS's long position.
The idea behind Hindustan Construction and Syrma SGS Technology 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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