Correlation Between Hisar Metal and IG Petrochemicals

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

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

Diversification Opportunities for Hisar Metal and IG Petrochemicals

0.58

Correlation Coefficient

Hisar Metal  IG Petrochemicals

Very weak diversification

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

Pair Corralation between Hisar Metal and IG Petrochemicals

Assuming the 90 days trading horizon Hisar Metal Industries is expected to generate 1.45 times more return on investment than IG Petrochemicals. However, Hisar Metal is 1.45 times more volatile than IG Petrochemicals Limited. It trades about 0.04 of its potential returns per unit of risk. IG Petrochemicals Limited is currently generating about 0.02 per unit of risk. If you would invest  13,134  in Hisar Metal Industries on September 19, 2024 and sell it today you would earn a total of  6,313  from holding Hisar Metal Industries or generate 48.07% return on investment over 90 days.

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

Hisar Metal Industries  vs.  IG Petrochemicals Limited

Hisar Metal Industries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hisar Metal Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Hisar Metal is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

IG Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IG Petrochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

Pair Trading with Hisar Metal and IG Petrochemicals

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

The idea behind Hisar Metal Industries and IG Petrochemicals Limited 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.