Correlation Between Hilton Metal and Trent

Can any of the company-specific risk be diversified away by investing in both Hilton Metal and Trent 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 Trent 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 Trent Limited, you can compare the effects of market volatilities on Hilton Metal and Trent 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 Trent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hilton Metal and Trent.

Diversification Opportunities for Hilton Metal and Trent

0.12

Correlation Coefficient

Hilton Metal  Trent

Average diversification

The 3 months correlation between Hilton and Trent is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Metal Forging and Trent Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trent Limited 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 Trent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trent Limited has no effect on the direction of Hilton Metal i.e., Hilton Metal and Trent go up and down completely randomly.

Pair Corralation between Hilton Metal and Trent

Assuming the 90 days trading horizon Hilton Metal Forging is expected to under-perform the Trent. In addition to that, Hilton Metal is 1.25 times more volatile than Trent Limited. It trades about -0.08 of its total potential returns per unit of risk. Trent Limited is currently generating about 0.14 per unit of volatility. If you would invest  466,220  in Trent Limited on September 1, 2024 and sell it today you would earn a total of  213,320  from holding Trent Limited or generate 45.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Hilton Metal Forging  vs.  Trent Limited

Hilton Metal Forging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hilton Metal Forging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Trent Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trent Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Trent is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hilton Metal and Trent

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

The idea behind Hilton Metal Forging and Trent 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.