Correlation Between Hindustan Aeronautics and Cholamandalam Financial

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

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

Diversification Opportunities for Hindustan Aeronautics and Cholamandalam Financial

0.2

Correlation Coefficient

Hindustan Aeronautics  Cholamandalam Financial

Modest diversification

The 3 months correlation between Hindustan and Cholamandalam is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Aeronautics Limited and Cholamandalam Financial Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cholamandalam Financial and Hindustan Aeronautics 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 Hindustan Aeronautics Limited are associated (or correlated) with Cholamandalam Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cholamandalam Financial has no effect on the direction of Hindustan Aeronautics i.e., Hindustan Aeronautics and Cholamandalam Financial go up and down completely randomly.

Pair Corralation between Hindustan Aeronautics and Cholamandalam Financial

Assuming the 90 days trading horizon Hindustan Aeronautics Limited is expected to generate 0.78 times more return on investment than Cholamandalam Financial. However, Hindustan Aeronautics Limited is 1.29 times less risky than Cholamandalam Financial. It trades about 0.11 of its potential returns per unit of risk. Cholamandalam Financial Holdings is currently generating about 0.04 per unit of risk. If you would invest  419,640  in Hindustan Aeronautics Limited on April 25, 2025 and sell it today you would earn a total of  51,940  from holding Hindustan Aeronautics Limited or generate 12.38% return on investment over 90 days.

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

Hindustan Aeronautics Limited  vs.  Cholamandalam Financial Holdin

Hindustan Aeronautics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hindustan Aeronautics Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Hindustan Aeronautics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Cholamandalam Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cholamandalam Financial Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Cholamandalam Financial may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Hindustan Aeronautics and Cholamandalam Financial

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

The idea behind Hindustan Aeronautics Limited and Cholamandalam Financial Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..