Correlation Between Sarthak Metals and Hindustan Construction

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

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

Diversification Opportunities for Sarthak Metals and Hindustan Construction

0.15

Correlation Coefficient

Sarthak Metals  Hindustan Construction

Average diversification

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

Pair Corralation between Sarthak Metals and Hindustan Construction

Assuming the 90 days trading horizon Sarthak Metals is expected to generate 4.69 times less return on investment than Hindustan Construction. In addition to that, Sarthak Metals is 1.18 times more volatile than Hindustan Construction. It trades about 0.01 of its total potential returns per unit of risk. Hindustan Construction is currently generating about 0.03 per unit of volatility. If you would invest  4,310  in Hindustan Construction on September 20, 2024 and sell it today you would earn a total of  156.00  from holding Hindustan Construction or generate 3.62% return on investment over 90 days.

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

Sarthak Metals Limited  vs.  Hindustan Construction

Sarthak Metals

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Sarthak Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sarthak Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Hindustan Construction

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hindustan Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Hindustan Construction may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sarthak Metals and Hindustan Construction

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

The idea behind Sarthak Metals Limited and Hindustan Construction 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.