Correlation Between HDFC Life and Hisar Metal

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

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

Diversification Opportunities for HDFC Life and Hisar Metal

-0.17

Correlation Coefficient

HDFC Life  Hisar Metal

Good diversification

The 3 months correlation between HDFC and Hisar is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding HDFC Life Insurance 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 HDFC Life 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 HDFC Life Insurance 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 HDFC Life i.e., HDFC Life and Hisar Metal go up and down completely randomly.

Pair Corralation between HDFC Life and Hisar Metal

Assuming the 90 days trading horizon HDFC Life Insurance is expected to under-perform the Hisar Metal. But the stock apears to be less risky and, when comparing its historical volatility, HDFC Life Insurance is 3.26 times less risky than Hisar Metal. The stock trades about -0.24 of its potential returns per unit of risk. The Hisar Metal Industries is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  16,782  in Hisar Metal Industries on September 29, 2024 and sell it today you would earn a total of  5,305  from holding Hisar Metal Industries or generate 31.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

HDFC Life Insurance  vs.  Hisar Metal Industries

HDFC Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HDFC Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hisar Metal Industries

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hisar Metal Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Hisar Metal exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HDFC Life and Hisar Metal

The main advantage of trading using opposite HDFC Life and Hisar Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HDFC Life 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 HDFC Life Insurance 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.