Correlation Between Hilton Metal and V Mart

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

Diversification Opportunities for Hilton Metal and V Mart

-0.13

Correlation Coefficient

Hilton Metal  V Mart

Good diversification

The 3 months correlation between Hilton and VMART is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Metal Forging and V Mart Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on V Mart Retail 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 V Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of V Mart Retail has no effect on the direction of Hilton Metal i.e., Hilton Metal and V Mart go up and down completely randomly.

Pair Corralation between Hilton Metal and V Mart

Assuming the 90 days trading horizon Hilton Metal Forging is expected to generate 0.85 times more return on investment than V Mart. However, Hilton Metal Forging is 1.17 times less risky than V Mart. It trades about 0.12 of its potential returns per unit of risk. V Mart Retail Limited is currently generating about 0.03 per unit of risk. If you would invest  8,487  in Hilton Metal Forging on September 20, 2024 and sell it today you would earn a total of  1,660  from holding Hilton Metal Forging or generate 19.56% return on investment over 90 days.

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

Hilton Metal Forging  vs.  V Mart Retail Limited

Hilton Metal Forging

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Hilton Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

V Mart Retail

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in V Mart Retail Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, V Mart is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hilton Metal and V Mart

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

The idea behind Hilton Metal Forging and V Mart Retail 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.