Correlation Between Gujarat Alkalies and SAL Steel

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

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

Diversification Opportunities for Gujarat Alkalies and SAL Steel

0.46

Correlation Coefficient

Gujarat Alkalies  SAL Steel

Very weak diversification

The 3 months correlation between Gujarat and SAL is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Alkalies and and SAL Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAL Steel Limited and Gujarat Alkalies 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 Gujarat Alkalies and are associated (or correlated) with SAL Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAL Steel Limited has no effect on the direction of Gujarat Alkalies i.e., Gujarat Alkalies and SAL Steel go up and down completely randomly.

Pair Corralation between Gujarat Alkalies and SAL Steel

Assuming the 90 days trading horizon Gujarat Alkalies is expected to generate 4.65 times less return on investment than SAL Steel. But when comparing it to its historical volatility, Gujarat Alkalies and is 1.55 times less risky than SAL Steel. It trades about 0.02 of its potential returns per unit of risk. SAL Steel Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,505  in SAL Steel Limited on September 20, 2024 and sell it today you would earn a total of  946.00  from holding SAL Steel Limited or generate 62.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.39%
Values	Daily Returns

Gujarat Alkalies and  vs.  SAL Steel Limited

Gujarat Alkalies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gujarat Alkalies and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Gujarat Alkalies is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

SAL Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAL Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SAL Steel is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gujarat Alkalies and SAL Steel

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

The idea behind Gujarat Alkalies and and SAL 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.