Correlation Between KIOCL and Hisar Metal

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

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

Diversification Opportunities for KIOCL and Hisar Metal

0.48

Correlation Coefficient

KIOCL  Hisar Metal

Very weak diversification

The 3 months correlation between KIOCL and Hisar is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding KIOCL Limited 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 KIOCL 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 KIOCL Limited 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 KIOCL i.e., KIOCL and Hisar Metal go up and down completely randomly.

Pair Corralation between KIOCL and Hisar Metal

Assuming the 90 days trading horizon KIOCL Limited is expected to generate 1.51 times more return on investment than Hisar Metal. However, KIOCL is 1.51 times more volatile than Hisar Metal Industries. It trades about -0.03 of its potential returns per unit of risk. Hisar Metal Industries is currently generating about -0.07 per unit of risk. If you would invest  41,130  in KIOCL Limited on September 2, 2024 and sell it today you would lose (3,895) from holding KIOCL Limited or give up 9.47% of portfolio value over 90 days.

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

KIOCL Limited  vs.  Hisar Metal Industries

KIOCL Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KIOCL Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, KIOCL is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

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 latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with KIOCL and Hisar Metal

The main advantage of trading using opposite KIOCL and Hisar Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KIOCL 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 KIOCL Limited 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.