Correlation Between Hisar Metal and Tera Software

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

Diversification Opportunities for Hisar Metal and Tera Software

0.29

Correlation Coefficient

Hisar Metal  Tera Software

Modest diversification

The 3 months correlation between Hisar and Tera is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Hisar Metal Industries and Tera Software Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tera Software Limited 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 Tera Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tera Software Limited has no effect on the direction of Hisar Metal i.e., Hisar Metal and Tera Software go up and down completely randomly.

Pair Corralation between Hisar Metal and Tera Software

Assuming the 90 days trading horizon Hisar Metal is expected to generate 7.17 times less return on investment than Tera Software. But when comparing it to its historical volatility, Hisar Metal Industries is 1.6 times less risky than Tera Software. It trades about 0.09 of its potential returns per unit of risk. Tera Software Limited is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  7,800  in Tera Software Limited on October 24, 2024 and sell it today you would earn a total of  14,942  from holding Tera Software Limited or generate 191.56% return on investment over 90 days.

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

Hisar Metal Industries  vs.  Tera Software Limited

Hisar Metal Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hisar Metal Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Hisar Metal exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tera Software Limited

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Tera Software Limited are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Tera Software reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hisar Metal and Tera Software

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

The idea behind Hisar Metal Industries and Tera Software Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.