Correlation Between Hisar Metal and Power Finance

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

Diversification Opportunities for Hisar Metal and Power Finance

0.13

Correlation Coefficient

Hisar Metal  Power Finance

Average diversification

The 3 months correlation between Hisar and Power is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Hisar Metal Industries and Power Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Finance 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 Power Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Finance has no effect on the direction of Hisar Metal i.e., Hisar Metal and Power Finance go up and down completely randomly.

Pair Corralation between Hisar Metal and Power Finance

Assuming the 90 days trading horizon Hisar Metal Industries is expected to generate 1.11 times more return on investment than Power Finance. However, Hisar Metal is 1.11 times more volatile than Power Finance. It trades about 0.01 of its potential returns per unit of risk. Power Finance is currently generating about -0.16 per unit of risk. If you would invest  16,939  in Hisar Metal Industries on December 1, 2024 and sell it today you would lose (7.00) from holding Hisar Metal Industries or give up 0.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Hisar Metal Industries  vs.  Power Finance

Hisar Metal Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hisar Metal Industries are ranked lower than 1 (%) 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.

Power Finance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Hisar Metal and Power Finance

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

The idea behind Hisar Metal Industries and Power Finance 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.