Correlation Between Hisar Metal and Repco Home

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

Diversification Opportunities for Hisar Metal and Repco Home

-0.7

Correlation Coefficient

Hisar Metal  Repco Home

Excellent diversification

The 3 months correlation between Hisar and Repco is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hisar Metal Industries and Repco Home Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Repco Home 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 Repco Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Repco Home Finance has no effect on the direction of Hisar Metal i.e., Hisar Metal and Repco Home go up and down completely randomly.

Pair Corralation between Hisar Metal and Repco Home

Assuming the 90 days trading horizon Hisar Metal Industries is expected to generate 1.26 times more return on investment than Repco Home. However, Hisar Metal is 1.26 times more volatile than Repco Home Finance. It trades about 0.06 of its potential returns per unit of risk. Repco Home Finance is currently generating about -0.08 per unit of risk. If you would invest  18,619  in Hisar Metal Industries on October 20, 2024 and sell it today you would earn a total of  2,665  from holding Hisar Metal Industries or generate 14.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Hisar Metal Industries  vs.  Repco Home Finance

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.

Repco Home Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Repco Home 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 basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Hisar Metal and Repco Home

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

The idea behind Hisar Metal Industries and Repco Home 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.