Correlation Between Ratnamani Metals and Hisar Metal

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

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

Diversification Opportunities for Ratnamani Metals and Hisar Metal

0.63

Correlation Coefficient

Ratnamani Metals  Hisar Metal

Poor diversification

The 3 months correlation between Ratnamani and Hisar is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ratnamani Metals Tubes 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 Ratnamani Metals 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 Ratnamani Metals Tubes 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 Ratnamani Metals i.e., Ratnamani Metals and Hisar Metal go up and down completely randomly.

Pair Corralation between Ratnamani Metals and Hisar Metal

Assuming the 90 days trading horizon Ratnamani Metals Tubes is expected to generate 0.67 times more return on investment than Hisar Metal. However, Ratnamani Metals Tubes is 1.48 times less risky than Hisar Metal. It trades about -0.07 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  371,725  in Ratnamani Metals Tubes on September 2, 2024 and sell it today you would lose (28,425) from holding Ratnamani Metals Tubes or give up 7.65% of portfolio value over 90 days.

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

Ratnamani Metals Tubes  vs.  Hisar Metal Industries

Ratnamani Metals Tubes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ratnamani Metals Tubes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 Ratnamani Metals and Hisar Metal

The main advantage of trading using opposite Ratnamani Metals and Hisar Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ratnamani Metals 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 Ratnamani Metals Tubes 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.