Correlation Between Hisar Metal and Indian Oil

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

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

Diversification Opportunities for Hisar Metal and Indian Oil

0.67

Correlation Coefficient

Hisar Metal  Indian Oil

Poor diversification

The 3 months correlation between Hisar and Indian is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hisar Metal Industries and Indian Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Oil and Hisar Metal 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 Hisar Metal Industries are associated (or correlated) with Indian Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Oil has no effect on the direction of Hisar Metal i.e., Hisar Metal and Indian Oil go up and down completely randomly.

Pair Corralation between Hisar Metal and Indian Oil

Assuming the 90 days trading horizon Hisar Metal Industries is expected to generate 1.5 times more return on investment than Indian Oil. However, Hisar Metal is 1.5 times more volatile than Indian Oil. It trades about 0.01 of its potential returns per unit of risk. Indian Oil is currently generating about -0.16 per unit of risk. If you would invest  19,327  in Hisar Metal Industries on September 18, 2024 and sell it today you would earn a total of  60.00  from holding Hisar Metal Industries or generate 0.31% return on investment over 90 days.

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

Hisar Metal Industries  vs.  Indian Oil

Hisar Metal Industries

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hisar Metal Industries are ranked lower than 1 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Indian Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indian Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Hisar Metal and Indian Oil

The main advantage of trading using opposite Hisar Metal and Indian Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hisar Metal position performs unexpectedly, Indian Oil 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 Indian Oil will offset losses from the drop in Indian Oil's long position.

The idea behind Hisar Metal Industries and Indian Oil 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.