Correlation Between Alkali Metals and JSW Steel

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

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

Diversification Opportunities for Alkali Metals and JSW Steel

-0.77

Correlation Coefficient

Alkali Metals  JSW Steel

Pay attention - limited upside

The 3 months correlation between Alkali and JSW is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Alkali Metals Limited and JSW Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSW Steel Limited and Alkali 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 Alkali Metals Limited are associated (or correlated) with JSW Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSW Steel Limited has no effect on the direction of Alkali Metals i.e., Alkali Metals and JSW Steel go up and down completely randomly.

Pair Corralation between Alkali Metals and JSW Steel

Assuming the 90 days trading horizon Alkali Metals Limited is expected to under-perform the JSW Steel. In addition to that, Alkali Metals is 2.36 times more volatile than JSW Steel Limited. It trades about -0.13 of its total potential returns per unit of risk. JSW Steel Limited is currently generating about 0.19 per unit of volatility. If you would invest  92,185  in JSW Steel Limited on December 25, 2024 and sell it today you would earn a total of  13,985  from holding JSW Steel Limited or generate 15.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Alkali Metals Limited  vs.  JSW Steel Limited

Alkali Metals Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alkali Metals 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 basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

JSW Steel Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Steel Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, JSW Steel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alkali Metals and JSW Steel

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

The idea behind Alkali Metals Limited and JSW Steel 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.