Correlation Between Hisar Metal and Western India

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

Diversification Opportunities for Hisar Metal and Western India

0.66

Correlation Coefficient

Hisar Metal  Western India

Poor diversification

The 3 months correlation between Hisar and Western is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hisar Metal Industries and The Western India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western 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 Western India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western India has no effect on the direction of Hisar Metal i.e., Hisar Metal and Western India go up and down completely randomly.

Pair Corralation between Hisar Metal and Western India

Assuming the 90 days trading horizon Hisar Metal Industries is expected to generate 1.2 times more return on investment than Western India. However, Hisar Metal is 1.2 times more volatile than The Western India. It trades about -0.03 of its potential returns per unit of risk. The Western India is currently generating about -0.21 per unit of risk. If you would invest  21,706  in Hisar Metal Industries on December 26, 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.  The Western India

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Western India

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Western India 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 comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Hisar Metal and Western India

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

The idea behind Hisar Metal Industries and The Western 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.