Correlation Between Hisar Metal and Ravi Kumar

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

Diversification Opportunities for Hisar Metal and Ravi Kumar

0.75

Correlation Coefficient

Hisar Metal  Ravi Kumar

Poor diversification

The 3 months correlation between Hisar and Ravi is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hisar Metal Industries and Ravi Kumar Distilleries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ravi Kumar Distilleries 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 Ravi Kumar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ravi Kumar Distilleries has no effect on the direction of Hisar Metal i.e., Hisar Metal and Ravi Kumar go up and down completely randomly.

Pair Corralation between Hisar Metal and Ravi Kumar

Assuming the 90 days trading horizon Hisar Metal Industries is expected to generate 0.96 times more return on investment than Ravi Kumar. However, Hisar Metal Industries is 1.04 times less risky than Ravi Kumar. It trades about -0.03 of its potential returns per unit of risk. Ravi Kumar Distilleries is currently generating about -0.06 per unit of risk. If you would invest  21,706  in Hisar Metal Industries on December 25, 2024 and sell it today you would lose (1,698) from holding Hisar Metal Industries or give up 7.82% of portfolio value over 90 days.

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

Hisar Metal Industries  vs.  Ravi Kumar Distilleries

Hisar Metal Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hisar Metal Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Hisar Metal is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ravi Kumar Distilleries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ravi Kumar Distilleries 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 Ravi Kumar

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

The idea behind Hisar Metal Industries and Ravi Kumar Distilleries 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.