Correlation Between MSP Steel and Hisar Metal

Can any of the company-specific risk be diversified away by investing in both MSP Steel and Hisar Metal 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 MSP Steel and Hisar Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MSP Steel Power and Hisar Metal Industries, you can compare the effects of market volatilities on MSP Steel and Hisar Metal 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 MSP Steel with a short position of Hisar Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSP Steel and Hisar Metal.

Diversification Opportunities for MSP Steel and Hisar Metal

0.69

Correlation Coefficient

MSP Steel  Hisar Metal

Poor diversification

The 3 months correlation between MSP and Hisar is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding MSP Steel Power and Hisar Metal Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hisar Metal Industries and MSP Steel 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 MSP Steel Power are associated (or correlated) with Hisar Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hisar Metal Industries has no effect on the direction of MSP Steel i.e., MSP Steel and Hisar Metal go up and down completely randomly.

Pair Corralation between MSP Steel and Hisar Metal

Assuming the 90 days trading horizon MSP Steel is expected to generate 3.13 times less return on investment than Hisar Metal. But when comparing it to its historical volatility, MSP Steel Power is 1.87 times less risky than Hisar Metal. It trades about 0.27 of its potential returns per unit of risk. Hisar Metal Industries is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  16,204  in Hisar Metal Industries on September 23, 2024 and sell it today you would earn a total of  5,590  from holding Hisar Metal Industries or generate 34.5% return on investment over 90 days.

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

MSP Steel Power  vs.  Hisar Metal Industries

MSP Steel Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MSP Steel Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 uncertain basic indicators, Hisar Metal exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MSP Steel and Hisar Metal

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

The idea behind MSP Steel Power and Hisar Metal Industries 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.