Correlation Between GM Breweries and Hisar Metal

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

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

Diversification Opportunities for GM Breweries and Hisar Metal

0.55

Correlation Coefficient

GM Breweries  Hisar Metal

Very weak diversification

The 3 months correlation between GMBREW and Hisar is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited 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 GM Breweries 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 GM Breweries Limited 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 GM Breweries i.e., GM Breweries and Hisar Metal go up and down completely randomly.

Pair Corralation between GM Breweries and Hisar Metal

Assuming the 90 days trading horizon GM Breweries is expected to generate 87.55 times less return on investment than Hisar Metal. But when comparing it to its historical volatility, GM Breweries Limited is 1.96 times less risky than Hisar Metal. It trades about 0.01 of its potential returns per unit of risk. Hisar Metal Industries is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  16,692  in Hisar Metal Industries on September 28, 2024 and sell it today you would earn a total of  5,014  from holding Hisar Metal Industries or generate 30.04% return on investment over 90 days.

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

GM Breweries Limited  vs.  Hisar Metal Industries

GM Breweries Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GM Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hisar Metal Industries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hisar Metal Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Hisar Metal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GM Breweries and Hisar Metal

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

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.