Correlation Between Hindustan Aeronautics and Generic Engineering

Can any of the company-specific risk be diversified away by investing in both Hindustan Aeronautics and Generic Engineering 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 Generic Engineering 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 Generic Engineering Construction, you can compare the effects of market volatilities on Hindustan Aeronautics and Generic Engineering 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 Generic Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hindustan Aeronautics and Generic Engineering.

Diversification Opportunities for Hindustan Aeronautics and Generic Engineering

0.73

Correlation Coefficient

Hindustan Aeronautics  Generic Engineering

Poor diversification

The 3 months correlation between Hindustan and Generic is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Aeronautics Limited and Generic Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generic Engineering 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 Generic Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generic Engineering has no effect on the direction of Hindustan Aeronautics i.e., Hindustan Aeronautics and Generic Engineering go up and down completely randomly.

Pair Corralation between Hindustan Aeronautics and Generic Engineering

Assuming the 90 days trading horizon Hindustan Aeronautics is expected to generate 1.95 times less return on investment than Generic Engineering. But when comparing it to its historical volatility, Hindustan Aeronautics Limited is 1.97 times less risky than Generic Engineering. It trades about 0.11 of its potential returns per unit of risk. Generic Engineering Construction is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,258  in Generic Engineering Construction on April 25, 2025 and sell it today you would earn a total of  755.00  from holding Generic Engineering Construction or generate 23.17% return on investment over 90 days.

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

Hindustan Aeronautics Limited  vs.  Generic Engineering Constructi

Hindustan Aeronautics

Risk-Adjusted Performance

Modest

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.

Generic Engineering

Risk-Adjusted Performance

Modest

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

Pair Trading with Hindustan Aeronautics and Generic Engineering

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

The idea behind Hindustan Aeronautics Limited and Generic Engineering 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.