Correlation Between PI Industries and Hisar Metal

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

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

Diversification Opportunities for PI Industries and Hisar Metal

0.84

Correlation Coefficient

PI Industries  Hisar Metal

Very poor diversification

The 3 months correlation between PIIND and Hisar is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding PI Industries Limited 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 PI Industries 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 PI Industries Limited 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 PI Industries i.e., PI Industries and Hisar Metal go up and down completely randomly.

Pair Corralation between PI Industries and Hisar Metal

Assuming the 90 days trading horizon PI Industries Limited is expected to under-perform the Hisar Metal. But the stock apears to be less risky and, when comparing its historical volatility, PI Industries Limited is 1.54 times less risky than Hisar Metal. The stock trades about -0.06 of its potential returns per unit of risk. The Hisar Metal Industries is currently generating about -0.03 of returns per unit of risk over similar time horizon. 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	Strong
Accuracy	100.0%
Values	Daily Returns

PI Industries Limited  vs.  Hisar Metal Industries

PI Industries Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days PI Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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.

Pair Trading with PI Industries and Hisar Metal

The main advantage of trading using opposite PI Industries and Hisar Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PI Industries 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 PI Industries Limited 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.