Correlation Between Hindustan Foods and Shyam Metalics

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

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

Diversification Opportunities for Hindustan Foods and Shyam Metalics

0.85

Correlation Coefficient

Hindustan Foods  Shyam Metalics

Very poor diversification

The 3 months correlation between Hindustan and Shyam is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Foods Limited and Shyam Metalics and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shyam Metalics and Hindustan Foods 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 Foods Limited are associated (or correlated) with Shyam Metalics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shyam Metalics has no effect on the direction of Hindustan Foods i.e., Hindustan Foods and Shyam Metalics go up and down completely randomly.

Pair Corralation between Hindustan Foods and Shyam Metalics

Assuming the 90 days trading horizon Hindustan Foods Limited is expected to under-perform the Shyam Metalics. In addition to that, Hindustan Foods is 1.03 times more volatile than Shyam Metalics and. It trades about -0.01 of its total potential returns per unit of risk. Shyam Metalics and is currently generating about 0.04 per unit of volatility. If you would invest  80,205  in Shyam Metalics and on September 2, 2024 and sell it today you would earn a total of  3,255  from holding Shyam Metalics and or generate 4.06% return on investment over 90 days.

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

Hindustan Foods Limited  vs.  Shyam Metalics and

Hindustan Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindustan Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Hindustan Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shyam Metalics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shyam Metalics and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Shyam Metalics is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Hindustan Foods and Shyam Metalics

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

The idea behind Hindustan Foods Limited and Shyam Metalics and 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.