Correlation Between Syrma SGS and Hindustan Construction

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

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

Diversification Opportunities for Syrma SGS and Hindustan Construction

0.16

Correlation Coefficient

Syrma SGS  Hindustan Construction

Average diversification

The 3 months correlation between Syrma and Hindustan is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Syrma SGS Technology and Hindustan Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindustan Construction and Syrma SGS 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 Syrma SGS Technology 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 Syrma SGS i.e., Syrma SGS and Hindustan Construction go up and down completely randomly.

Pair Corralation between Syrma SGS and Hindustan Construction

Assuming the 90 days trading horizon Syrma SGS Technology is expected to generate 1.04 times more return on investment than Hindustan Construction. However, Syrma SGS is 1.04 times more volatile than Hindustan Construction. It trades about 0.15 of its potential returns per unit of risk. Hindustan Construction is currently generating about 0.05 per unit of risk. If you would invest  44,480  in Syrma SGS Technology on September 19, 2024 and sell it today you would earn a total of  14,860  from holding Syrma SGS Technology or generate 33.41% return on investment over 90 days.

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

Syrma SGS Technology  vs.  Hindustan Construction

Syrma SGS Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Syrma SGS Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Syrma SGS displayed solid returns over the last few months and may actually be approaching a breakup point.

Hindustan Construction

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hindustan Construction are ranked lower than 3 (%) 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 Syrma SGS and Hindustan Construction

The main advantage of trading using opposite Syrma SGS and Hindustan Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Syrma SGS 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 Syrma SGS Technology 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.

Check out your portfolio center.

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.