Correlation Between Hindustan Zinc and Orissa Minerals

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

By analyzing existing cross correlation between Hindustan Zinc Limited and The Orissa Minerals, you can compare the effects of market volatilities on Hindustan Zinc and Orissa Minerals 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 Zinc with a short position of Orissa Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hindustan Zinc and Orissa Minerals.

Diversification Opportunities for Hindustan Zinc and Orissa Minerals

0.15

Correlation Coefficient

Hindustan Zinc  Orissa Minerals

Average diversification

The 3 months correlation between Hindustan and Orissa is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Zinc Limited and The Orissa Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orissa Minerals and Hindustan Zinc 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 Zinc Limited are associated (or correlated) with Orissa Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orissa Minerals has no effect on the direction of Hindustan Zinc i.e., Hindustan Zinc and Orissa Minerals go up and down completely randomly.

Pair Corralation between Hindustan Zinc and Orissa Minerals

Assuming the 90 days trading horizon Hindustan Zinc Limited is expected to generate 0.87 times more return on investment than Orissa Minerals. However, Hindustan Zinc Limited is 1.15 times less risky than Orissa Minerals. It trades about 0.03 of its potential returns per unit of risk. The Orissa Minerals is currently generating about -0.01 per unit of risk. If you would invest  49,385  in Hindustan Zinc Limited on August 31, 2024 and sell it today you would earn a total of  1,075  from holding Hindustan Zinc Limited or generate 2.18% return on investment over 90 days.

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

Hindustan Zinc Limited  vs.  The Orissa Minerals

Hindustan Zinc

Risk-Adjusted Performance

2 of 100

Very Weak

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

Orissa Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hindustan Zinc and Orissa Minerals

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

The idea behind Hindustan Zinc Limited and The Orissa Minerals 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.