Correlation Between ITTEFAQ Iron and Amreli Steels

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

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

Diversification Opportunities for ITTEFAQ Iron and Amreli Steels

0.87

Correlation Coefficient

ITTEFAQ Iron  Amreli Steels

Very poor diversification

The 3 months correlation between ITTEFAQ and Amreli is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding ITTEFAQ Iron Industries and Amreli Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amreli Steels and ITTEFAQ Iron 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 ITTEFAQ Iron Industries are associated (or correlated) with Amreli Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amreli Steels has no effect on the direction of ITTEFAQ Iron i.e., ITTEFAQ Iron and Amreli Steels go up and down completely randomly.

Pair Corralation between ITTEFAQ Iron and Amreli Steels

Assuming the 90 days trading horizon ITTEFAQ Iron Industries is expected to generate 2.18 times more return on investment than Amreli Steels. However, ITTEFAQ Iron is 2.18 times more volatile than Amreli Steels. It trades about 0.12 of its potential returns per unit of risk. Amreli Steels is currently generating about 0.15 per unit of risk. If you would invest  740.00  in ITTEFAQ Iron Industries on October 10, 2024 and sell it today you would earn a total of  105.00  from holding ITTEFAQ Iron Industries or generate 14.19% return on investment over 90 days.

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

ITTEFAQ Iron Industries  vs.  Amreli Steels

ITTEFAQ Iron Industries

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ITTEFAQ Iron Industries are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, ITTEFAQ Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Amreli Steels

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amreli Steels are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amreli Steels sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ITTEFAQ Iron and Amreli Steels

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

The idea behind ITTEFAQ Iron Industries and Amreli Steels 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.