Correlation Between Tata Investment and Hisar Metal

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

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

Diversification Opportunities for Tata Investment and Hisar Metal

0.32

Correlation Coefficient

Tata Investment  Hisar Metal

Weak diversification

The 3 months correlation between Tata and Hisar is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Tata Investment 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 Tata Investment 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 Tata Investment 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 Tata Investment i.e., Tata Investment and Hisar Metal go up and down completely randomly.

Pair Corralation between Tata Investment and Hisar Metal

Assuming the 90 days trading horizon Tata Investment is expected to under-perform the Hisar Metal. But the stock apears to be less risky and, when comparing its historical volatility, Tata Investment is 2.01 times less risky than Hisar Metal. The stock trades about -0.02 of its potential returns per unit of risk. The Hisar Metal Industries is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  18,333  in Hisar Metal Industries on October 9, 2024 and sell it today you would earn a total of  3,018  from holding Hisar Metal Industries or generate 16.46% return on investment over 90 days.

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

Tata Investment  vs.  Hisar Metal Industries

Tata Investment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tata Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, Tata Investment is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Hisar Metal Industries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hisar Metal Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Hisar Metal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tata Investment and Hisar Metal

The main advantage of trading using opposite Tata Investment and Hisar Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tata Investment 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 Tata Investment 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 Stocks Directory module to find actively traded stocks across global markets.