Correlation Between Hisar Metal and Sapphire Foods

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

Diversification Opportunities for Hisar Metal and Sapphire Foods

0.78

Correlation Coefficient

Hisar Metal  Sapphire Foods

Poor diversification

The 3 months correlation between Hisar and Sapphire is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Hisar Metal Industries and Sapphire Foods India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapphire Foods India 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 Sapphire Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapphire Foods India has no effect on the direction of Hisar Metal i.e., Hisar Metal and Sapphire Foods go up and down completely randomly.

Pair Corralation between Hisar Metal and Sapphire Foods

Assuming the 90 days trading horizon Hisar Metal Industries is expected to generate 1.18 times more return on investment than Sapphire Foods. However, Hisar Metal is 1.18 times more volatile than Sapphire Foods India. It trades about 0.01 of its potential returns per unit of risk. Sapphire Foods India is currently generating about -0.01 per unit of risk. If you would invest  19,359  in Hisar Metal Industries on September 14, 2024 and sell it today you would lose (57.00) from holding Hisar Metal Industries or give up 0.29% 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.  Sapphire Foods India

Hisar Metal Industries

Risk-Adjusted Performance

0 of 100

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.

Sapphire Foods India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapphire Foods India has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Sapphire Foods is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Hisar Metal and Sapphire Foods

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

The idea behind Hisar Metal Industries and Sapphire Foods India 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 CEOs Directory module to screen CEOs from public companies around the world.