Correlation Between Hilton Metal and Federal Bank

Can any of the company-specific risk be diversified away by investing in both Hilton Metal and Federal Bank 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 Hilton Metal and Federal Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hilton Metal Forging and The Federal Bank, you can compare the effects of market volatilities on Hilton Metal and Federal Bank 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 Hilton Metal with a short position of Federal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hilton Metal and Federal Bank.

Diversification Opportunities for Hilton Metal and Federal Bank

0.37

Correlation Coefficient

Hilton Metal  Federal Bank

Weak diversification

The 3 months correlation between Hilton and Federal is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Metal Forging and The Federal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Bank and Hilton Metal 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 Hilton Metal Forging are associated (or correlated) with Federal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Bank has no effect on the direction of Hilton Metal i.e., Hilton Metal and Federal Bank go up and down completely randomly.

Pair Corralation between Hilton Metal and Federal Bank

Assuming the 90 days trading horizon Hilton Metal Forging is expected to generate 1.36 times more return on investment than Federal Bank. However, Hilton Metal is 1.36 times more volatile than The Federal Bank. It trades about 0.08 of its potential returns per unit of risk. The Federal Bank is currently generating about 0.04 per unit of risk. If you would invest  8,715  in Hilton Metal Forging on September 24, 2024 and sell it today you would earn a total of  1,035  from holding Hilton Metal Forging or generate 11.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Hilton Metal Forging  vs.  The Federal Bank

Hilton Metal Forging

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Hilton Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Federal Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Federal Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Federal Bank is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Hilton Metal and Federal Bank

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

The idea behind Hilton Metal Forging and The Federal Bank 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.