Correlation Between Electrosteel Castings and Power Finance

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

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

Diversification Opportunities for Electrosteel Castings and Power Finance

0.05

Correlation Coefficient

Electrosteel Castings  Power Finance

Significant diversification

The 3 months correlation between Electrosteel and Power is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Electrosteel Castings Limited and Power Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Finance and Electrosteel Castings 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 Electrosteel Castings Limited are associated (or correlated) with Power Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Finance has no effect on the direction of Electrosteel Castings i.e., Electrosteel Castings and Power Finance go up and down completely randomly.

Pair Corralation between Electrosteel Castings and Power Finance

Assuming the 90 days trading horizon Electrosteel Castings Limited is expected to generate 0.84 times more return on investment than Power Finance. However, Electrosteel Castings Limited is 1.2 times less risky than Power Finance. It trades about 0.12 of its potential returns per unit of risk. Power Finance is currently generating about 0.1 per unit of risk. If you would invest  3,297  in Electrosteel Castings Limited on October 5, 2024 and sell it today you would earn a total of  11,250  from holding Electrosteel Castings Limited or generate 341.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.33%
Values	Daily Returns

Electrosteel Castings Limited  vs.  Power Finance

Electrosteel Castings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Power Finance

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Power Finance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Power Finance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Electrosteel Castings and Power Finance

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

The idea behind Electrosteel Castings Limited and Power Finance 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 Stocks Directory module to find actively traded stocks across global markets.