Correlation Between Hi Tech and Gujarat Lease

Can any of the company-specific risk be diversified away by investing in both Hi Tech and Gujarat Lease 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 Hi Tech and Gujarat Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Hi Tech Gears and Gujarat Lease Financing, you can compare the effects of market volatilities on Hi Tech and Gujarat Lease 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 Hi Tech with a short position of Gujarat Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hi Tech and Gujarat Lease.

Diversification Opportunities for Hi Tech and Gujarat Lease

0.06

Correlation Coefficient

Hi Tech  Gujarat Lease

Significant diversification

The 3 months correlation between HITECHGEAR and Gujarat is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding The Hi Tech Gears and Gujarat Lease Financing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Lease Financing and Hi Tech 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 The Hi Tech Gears are associated (or correlated) with Gujarat Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Lease Financing has no effect on the direction of Hi Tech i.e., Hi Tech and Gujarat Lease go up and down completely randomly.

Pair Corralation between Hi Tech and Gujarat Lease

Assuming the 90 days trading horizon Hi Tech is expected to generate 8.38 times less return on investment than Gujarat Lease. But when comparing it to its historical volatility, The Hi Tech Gears is 1.06 times less risky than Gujarat Lease. It trades about 0.01 of its potential returns per unit of risk. Gujarat Lease Financing is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  720.00  in Gujarat Lease Financing on September 20, 2024 and sell it today you would earn a total of  57.00  from holding Gujarat Lease Financing or generate 7.92% return on investment over 90 days.

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

The Hi Tech Gears  vs.  Gujarat Lease Financing

Hi Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Hi Tech Gears has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Hi Tech is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Gujarat Lease Financing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Gujarat Lease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hi Tech and Gujarat Lease

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

The idea behind The Hi Tech Gears and Gujarat Lease Financing 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 Global Correlations module to find global opportunities by holding instruments from different markets.