Correlation Between Total Transport and Hilton Metal

Can any of the company-specific risk be diversified away by investing in both Total Transport and Hilton Metal 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 Total Transport and Hilton Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Total Transport Systems and Hilton Metal Forging, you can compare the effects of market volatilities on Total Transport and Hilton Metal 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 Total Transport with a short position of Hilton Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Transport and Hilton Metal.

Diversification Opportunities for Total Transport and Hilton Metal

0.56

Correlation Coefficient

Total Transport  Hilton Metal

Very weak diversification

The 3 months correlation between Total and Hilton is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Total Transport Systems and Hilton Metal Forging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Metal Forging and Total Transport 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 Total Transport Systems are associated (or correlated) with Hilton Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Metal Forging has no effect on the direction of Total Transport i.e., Total Transport and Hilton Metal go up and down completely randomly.

Pair Corralation between Total Transport and Hilton Metal

Assuming the 90 days trading horizon Total Transport Systems is expected to under-perform the Hilton Metal. But the stock apears to be less risky and, when comparing its historical volatility, Total Transport Systems is 1.17 times less risky than Hilton Metal. The stock trades about -0.15 of its potential returns per unit of risk. The Hilton Metal Forging is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  8,631  in Hilton Metal Forging on September 5, 2024 and sell it today you would earn a total of  88.00  from holding Hilton Metal Forging or generate 1.02% return on investment over 90 days.

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

Total Transport Systems  vs.  Hilton Metal Forging

Total Transport Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Total Transport Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Hilton Metal Forging

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hilton Metal is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Total Transport and Hilton Metal

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

The idea behind Total Transport Systems and Hilton Metal Forging 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.