Correlation Between Zydus Wellness and Hilton Metal

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

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

Diversification Opportunities for Zydus Wellness and Hilton Metal

0.48

Correlation Coefficient

Zydus Wellness  Hilton Metal

Very weak diversification

The 3 months correlation between Zydus and Hilton is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Zydus Wellness Limited 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 Zydus Wellness 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 Zydus Wellness Limited 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 Zydus Wellness i.e., Zydus Wellness and Hilton Metal go up and down completely randomly.

Pair Corralation between Zydus Wellness and Hilton Metal

Assuming the 90 days trading horizon Zydus Wellness is expected to generate 12.5 times less return on investment than Hilton Metal. But when comparing it to its historical volatility, Zydus Wellness Limited is 1.88 times less risky than Hilton Metal. It trades about 0.05 of its potential returns per unit of risk. Hilton Metal Forging is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  8,335  in Hilton Metal Forging on September 21, 2024 and sell it today you would earn a total of  1,713  from holding Hilton Metal Forging or generate 20.55% return on investment over 90 days.

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

Zydus Wellness Limited  vs.  Hilton Metal Forging

Zydus Wellness

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zydus Wellness Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Zydus Wellness is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Hilton Metal Forging

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Hilton Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zydus Wellness and Hilton Metal

The main advantage of trading using opposite Zydus Wellness and Hilton Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zydus Wellness 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 Zydus Wellness Limited 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.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.