Correlation Between Hisar Metal and Indian Hotels

Can any of the company-specific risk be diversified away by investing in both Hisar Metal and Indian Hotels 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 Indian Hotels 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 The Indian Hotels, you can compare the effects of market volatilities on Hisar Metal and Indian Hotels 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 Indian Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hisar Metal and Indian Hotels.

Diversification Opportunities for Hisar Metal and Indian Hotels

0.42

Correlation Coefficient

Hisar Metal  Indian Hotels

Very weak diversification

The 3 months correlation between Hisar and Indian is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Hisar Metal Industries and The Indian Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Hotels 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 Indian Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Hotels has no effect on the direction of Hisar Metal i.e., Hisar Metal and Indian Hotels go up and down completely randomly.

Pair Corralation between Hisar Metal and Indian Hotels

Assuming the 90 days trading horizon Hisar Metal Industries is expected to generate 2.09 times more return on investment than Indian Hotels. However, Hisar Metal is 2.09 times more volatile than The Indian Hotels. It trades about 0.09 of its potential returns per unit of risk. The Indian Hotels is currently generating about -0.01 per unit of risk. If you would invest  20,093  in Hisar Metal Industries on October 11, 2024 and sell it today you would earn a total of  957.00  from holding Hisar Metal Industries or generate 4.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Hisar Metal Industries  vs.  The Indian Hotels

Hisar Metal Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hisar Metal Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Hisar Metal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Indian Hotels

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Indian Hotels are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Indian Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hisar Metal and Indian Hotels

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

The idea behind Hisar Metal Industries and The Indian Hotels 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.