Correlation Between Agro Tech and Hisar Metal

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

By analyzing existing cross correlation between Agro Tech Foods and Hisar Metal Industries, you can compare the effects of market volatilities on Agro Tech and Hisar 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 Agro Tech with a short position of Hisar Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agro Tech and Hisar Metal.

Diversification Opportunities for Agro Tech and Hisar Metal

0.58

Correlation Coefficient

Agro Tech  Hisar Metal

Very weak diversification

The 3 months correlation between Agro and Hisar is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Agro Tech Foods and Hisar Metal Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hisar Metal Industries and Agro Tech 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 Agro Tech Foods are associated (or correlated) with Hisar Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hisar Metal Industries has no effect on the direction of Agro Tech i.e., Agro Tech and Hisar Metal go up and down completely randomly.

Pair Corralation between Agro Tech and Hisar Metal

Assuming the 90 days trading horizon Agro Tech Foods is expected to under-perform the Hisar Metal. But the stock apears to be less risky and, when comparing its historical volatility, Agro Tech Foods is 1.52 times less risky than Hisar Metal. The stock trades about -0.1 of its potential returns per unit of risk. The Hisar Metal Industries is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  21,706  in Hisar Metal Industries on December 25, 2024 and sell it today you would lose (1,698) from holding Hisar Metal Industries or give up 7.82% of portfolio value over 90 days.

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

Agro Tech Foods  vs.  Hisar Metal Industries

Agro Tech Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agro Tech Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Hisar Metal Industries

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Agro Tech and Hisar Metal

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

The idea behind Agro Tech Foods and Hisar Metal Industries 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.