Correlation Between Royal Orchid and Hisar Metal

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

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

Diversification Opportunities for Royal Orchid and Hisar Metal

0.54

Correlation Coefficient

Royal Orchid  Hisar Metal

Very weak diversification

The 3 months correlation between Royal and Hisar is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Royal Orchid Hotels 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 Royal Orchid 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 Royal Orchid Hotels 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 Royal Orchid i.e., Royal Orchid and Hisar Metal go up and down completely randomly.

Pair Corralation between Royal Orchid and Hisar Metal

Assuming the 90 days trading horizon Royal Orchid Hotels is expected to generate 0.98 times more return on investment than Hisar Metal. However, Royal Orchid Hotels is 1.02 times less risky than Hisar Metal. It trades about 0.1 of its potential returns per unit of risk. Hisar Metal Industries is currently generating about 0.03 per unit of risk. If you would invest  32,260  in Royal Orchid Hotels on November 29, 2024 and sell it today you would earn a total of  5,615  from holding Royal Orchid Hotels or generate 17.41% return on investment over 90 days.

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

Royal Orchid Hotels  vs.  Hisar Metal Industries

Royal Orchid Hotels

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Orchid Hotels are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Royal Orchid sustained solid returns over the last few months and may actually be approaching a breakup point.

Hisar Metal Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hisar Metal Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Hisar Metal is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Royal Orchid and Hisar Metal

The main advantage of trading using opposite Royal Orchid and Hisar Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Orchid 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 Royal Orchid Hotels 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.