Correlation Between Electrosteel Castings and Welspun Corp

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

Diversification Opportunities for Electrosteel Castings and Welspun Corp

-0.12

Correlation Coefficient

Electrosteel Castings  Welspun Corp

Good diversification

The 3 months correlation between Electrosteel and Welspun is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Electrosteel Castings Limited and Welspun Corp Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welspun Corp 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 Welspun Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welspun Corp Limited has no effect on the direction of Electrosteel Castings i.e., Electrosteel Castings and Welspun Corp go up and down completely randomly.

Pair Corralation between Electrosteel Castings and Welspun Corp

Assuming the 90 days trading horizon Electrosteel Castings Limited is expected to under-perform the Welspun Corp. In addition to that, Electrosteel Castings is 1.83 times more volatile than Welspun Corp Limited. It trades about -0.22 of its total potential returns per unit of risk. Welspun Corp Limited is currently generating about 0.13 per unit of volatility. If you would invest  79,410  in Welspun Corp Limited on October 5, 2024 and sell it today you would earn a total of  2,640  from holding Welspun Corp Limited or generate 3.32% 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.  Welspun Corp 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Welspun Corp Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Welspun Corp Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Welspun Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electrosteel Castings and Welspun Corp

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

The idea behind Electrosteel Castings Limited and Welspun Corp 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.

Check out your portfolio center.

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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.