Correlation Between SME Leasing and Hi Tech

Can any of the company-specific risk be diversified away by investing in both SME Leasing and Hi Tech 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 SME Leasing and Hi Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SME Leasing and Hi Tech Lubricants, you can compare the effects of market volatilities on SME Leasing and Hi Tech 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 SME Leasing with a short position of Hi Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of SME Leasing and Hi Tech.

Diversification Opportunities for SME Leasing and Hi Tech

-0.61

Correlation Coefficient

SME Leasing  Hi Tech

Excellent diversification

The 3 months correlation between SME and HTL is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding SME Leasing and Hi Tech Lubricants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Tech Lubricants and SME Leasing 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 SME Leasing are associated (or correlated) with Hi Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Tech Lubricants has no effect on the direction of SME Leasing i.e., SME Leasing and Hi Tech go up and down completely randomly.

Pair Corralation between SME Leasing and Hi Tech

Assuming the 90 days trading horizon SME Leasing is expected to under-perform the Hi Tech. In addition to that, SME Leasing is 2.52 times more volatile than Hi Tech Lubricants. It trades about -0.08 of its total potential returns per unit of risk. Hi Tech Lubricants is currently generating about 0.17 per unit of volatility. If you would invest  3,409  in Hi Tech Lubricants on August 29, 2024 and sell it today you would earn a total of  707.00  from holding Hi Tech Lubricants or generate 20.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	58.14%
Values	Daily Returns

SME Leasing  vs.  Hi Tech Lubricants

SME Leasing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SME Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Hi Tech Lubricants

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hi Tech Lubricants are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Hi Tech is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SME Leasing and Hi Tech

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

The idea behind SME Leasing and Hi Tech Lubricants 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.