Correlation Between Cholamandalam Financial and Hisar Metal

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

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

Diversification Opportunities for Cholamandalam Financial and Hisar Metal

0.77

Correlation Coefficient

Cholamandalam Financial  Hisar Metal

Poor diversification

The 3 months correlation between Cholamandalam and Hisar is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cholamandalam Financial Holdin 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 Cholamandalam Financial 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 Cholamandalam Financial Holdings 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 Cholamandalam Financial i.e., Cholamandalam Financial and Hisar Metal go up and down completely randomly.

Pair Corralation between Cholamandalam Financial and Hisar Metal

Assuming the 90 days trading horizon Cholamandalam Financial Holdings is expected to generate 0.75 times more return on investment than Hisar Metal. However, Cholamandalam Financial Holdings is 1.34 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 0.01 per unit of risk. If you would invest  112,759  in Cholamandalam Financial Holdings on September 1, 2024 and sell it today you would earn a total of  50,421  from holding Cholamandalam Financial Holdings or generate 44.72% return on investment over 90 days.

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

Cholamandalam Financial Holdin  vs.  Hisar Metal Industries

Cholamandalam Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cholamandalam Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Cholamandalam Financial is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional 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 conflicting 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 Cholamandalam Financial and Hisar Metal

The main advantage of trading using opposite Cholamandalam Financial and Hisar Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cholamandalam Financial 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 Cholamandalam Financial Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.