Correlation Between Hisar Metal and Suzlon Energy

Can any of the company-specific risk be diversified away by investing in both Hisar Metal and Suzlon Energy 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 Suzlon Energy 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 Suzlon Energy Limited, you can compare the effects of market volatilities on Hisar Metal and Suzlon Energy 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 Suzlon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hisar Metal and Suzlon Energy.

Diversification Opportunities for Hisar Metal and Suzlon Energy

0.76

Correlation Coefficient

Hisar Metal  Suzlon Energy

Poor diversification

The 3 months correlation between Hisar and Suzlon is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Hisar Metal Industries and Suzlon Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzlon Energy Limited 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 Suzlon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzlon Energy Limited has no effect on the direction of Hisar Metal i.e., Hisar Metal and Suzlon Energy go up and down completely randomly.

Pair Corralation between Hisar Metal and Suzlon Energy

Assuming the 90 days trading horizon Hisar Metal Industries is expected to generate 0.92 times more return on investment than Suzlon Energy. However, Hisar Metal Industries is 1.09 times less risky than Suzlon Energy. It trades about 0.01 of its potential returns per unit of risk. Suzlon Energy Limited is currently generating about -0.13 per unit of risk. If you would invest  19,359  in Hisar Metal Industries on September 14, 2024 and sell it today you would lose (57.00) from holding Hisar Metal Industries or give up 0.29% of portfolio value over 90 days.

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

Hisar Metal Industries  vs.  Suzlon Energy Limited

Hisar Metal Industries

Risk-Adjusted Performance

0 of 100

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.

Suzlon Energy Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suzlon Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hisar Metal and Suzlon Energy

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

The idea behind Hisar Metal Industries and Suzlon Energy Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.