Correlation Between International Steels and ITTEFAQ Iron

Can any of the company-specific risk be diversified away by investing in both International Steels and ITTEFAQ Iron 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 International Steels and ITTEFAQ Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between International Steels and ITTEFAQ Iron Industries, you can compare the effects of market volatilities on International Steels and ITTEFAQ Iron 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 International Steels with a short position of ITTEFAQ Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Steels and ITTEFAQ Iron.

Diversification Opportunities for International Steels and ITTEFAQ Iron

0.76

Correlation Coefficient

International Steels  ITTEFAQ Iron

Poor diversification

The 3 months correlation between International and ITTEFAQ is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding International Steels and ITTEFAQ Iron Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITTEFAQ Iron Industries and International Steels 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 International Steels are associated (or correlated) with ITTEFAQ Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITTEFAQ Iron Industries has no effect on the direction of International Steels i.e., International Steels and ITTEFAQ Iron go up and down completely randomly.

Pair Corralation between International Steels and ITTEFAQ Iron

Assuming the 90 days trading horizon International Steels is expected to under-perform the ITTEFAQ Iron. But the stock apears to be less risky and, when comparing its historical volatility, International Steels is 2.5 times less risky than ITTEFAQ Iron. The stock trades about -0.16 of its potential returns per unit of risk. The ITTEFAQ Iron Industries is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  724.00  in ITTEFAQ Iron Industries on December 28, 2024 and sell it today you would lose (11.00) from holding ITTEFAQ Iron Industries or give up 1.52% of portfolio value over 90 days.

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

International Steels  vs.  ITTEFAQ Iron Industries

International Steels

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Steels has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

ITTEFAQ Iron Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ITTEFAQ Iron Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, ITTEFAQ Iron is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with International Steels and ITTEFAQ Iron

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

The idea behind International Steels and ITTEFAQ Iron Industries 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.