Correlation Between Hindcon Chemicals and Hisar Metal

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

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

Diversification Opportunities for Hindcon Chemicals and Hisar Metal

0.36

Correlation Coefficient

Hindcon Chemicals  Hisar Metal

Weak diversification

The 3 months correlation between Hindcon and Hisar is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Hindcon Chemicals 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 Hindcon Chemicals 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 Hindcon Chemicals 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 Hindcon Chemicals i.e., Hindcon Chemicals and Hisar Metal go up and down completely randomly.

Pair Corralation between Hindcon Chemicals and Hisar Metal

Assuming the 90 days trading horizon Hindcon Chemicals Limited is expected to generate 5.6 times more return on investment than Hisar Metal. However, Hindcon Chemicals is 5.6 times more volatile than Hisar Metal Industries. It trades about 0.05 of its potential returns per unit of risk. Hisar Metal Industries is currently generating about 0.04 per unit of risk. If you would invest  1,791  in Hindcon Chemicals Limited on October 4, 2024 and sell it today you would earn a total of  2,673  from holding Hindcon Chemicals Limited or generate 149.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Hindcon Chemicals Limited  vs.  Hisar Metal Industries

Hindcon Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindcon Chemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Hindcon Chemicals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the 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 February 2025.

Pair Trading with Hindcon Chemicals and Hisar Metal

The main advantage of trading using opposite Hindcon Chemicals and Hisar Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hindcon Chemicals 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 Hindcon Chemicals 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.