Correlation Between Shaily Engineering and Hisar Metal

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

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

Diversification Opportunities for Shaily Engineering and Hisar Metal

0.28

Correlation Coefficient

Shaily Engineering  Hisar Metal

Modest diversification

The 3 months correlation between Shaily and Hisar is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Shaily Engineering Plastics 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 Shaily Engineering 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 Shaily Engineering Plastics 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 Shaily Engineering i.e., Shaily Engineering and Hisar Metal go up and down completely randomly.

Pair Corralation between Shaily Engineering and Hisar Metal

Assuming the 90 days trading horizon Shaily Engineering is expected to generate 2.16 times less return on investment than Hisar Metal. But when comparing it to its historical volatility, Shaily Engineering Plastics is 1.31 times less risky than Hisar Metal. It trades about 0.24 of its potential returns per unit of risk. Hisar Metal Industries is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  16,782  in Hisar Metal Industries on September 29, 2024 and sell it today you would earn a total of  5,305  from holding Hisar Metal Industries or generate 31.61% return on investment over 90 days.

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

Shaily Engineering Plastics  vs.  Hisar Metal Industries

Shaily Engineering

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shaily Engineering Plastics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady forward indicators, Shaily Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Hisar Metal Industries

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hisar Metal Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Hisar Metal exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shaily Engineering and Hisar Metal

The main advantage of trading using opposite Shaily Engineering and Hisar Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shaily Engineering 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 Shaily Engineering Plastics 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.