Correlation Between Electrosteel Castings and Steelcast

Can any of the company-specific risk be diversified away by investing in both Electrosteel Castings and Steelcast 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 Steelcast 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 Steelcast Limited, you can compare the effects of market volatilities on Electrosteel Castings and Steelcast 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 Steelcast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electrosteel Castings and Steelcast.

Diversification Opportunities for Electrosteel Castings and Steelcast

-0.28

Correlation Coefficient

Electrosteel Castings  Steelcast

Very good diversification

The 3 months correlation between Electrosteel and Steelcast is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Electrosteel Castings Limited and Steelcast Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steelcast Limited 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 Steelcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steelcast Limited has no effect on the direction of Electrosteel Castings i.e., Electrosteel Castings and Steelcast go up and down completely randomly.

Pair Corralation between Electrosteel Castings and Steelcast

Assuming the 90 days trading horizon Electrosteel Castings Limited is expected to under-perform the Steelcast. In addition to that, Electrosteel Castings is 1.11 times more volatile than Steelcast Limited. It trades about -0.02 of its total potential returns per unit of risk. Steelcast Limited is currently generating about 0.24 per unit of volatility. If you would invest  76,205  in Steelcast Limited on September 23, 2024 and sell it today you would earn a total of  10,225  from holding Steelcast Limited or generate 13.42% return on investment over 90 days.

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

Electrosteel Castings Limited  vs.  Steelcast Limited

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Steelcast Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Steelcast Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Steelcast sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electrosteel Castings and Steelcast

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

The idea behind Electrosteel Castings Limited and Steelcast 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.