Correlation Between VA Tech and Hisar Metal

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

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

Diversification Opportunities for VA Tech and Hisar Metal

0.13

Correlation Coefficient

VA Tech  Hisar Metal

Average diversification

The 3 months correlation between WABAG and Hisar is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding VA Tech Wabag 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 VA Tech 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 VA Tech Wabag 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 VA Tech i.e., VA Tech and Hisar Metal go up and down completely randomly.

Pair Corralation between VA Tech and Hisar Metal

Assuming the 90 days trading horizon VA Tech Wabag is expected to under-perform the Hisar Metal. In addition to that, VA Tech is 1.22 times more volatile than Hisar Metal Industries. It trades about -0.12 of its total potential returns per unit of risk. Hisar Metal Industries is currently generating about 0.01 per unit of volatility. If you would invest  20,093  in Hisar Metal Industries on December 10, 2024 and sell it today you would lose (273.00) from holding Hisar Metal Industries or give up 1.36% of portfolio value over 90 days.

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

VA Tech Wabag  vs.  Hisar Metal Industries

VA Tech Wabag

Risk-Adjusted Performance

Very Weak

Over the last 90 days VA Tech Wabag has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with VA Tech and Hisar Metal

The main advantage of trading using opposite VA Tech and Hisar Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VA Tech 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 VA Tech Wabag 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.