Correlation Between ITTEFAQ Iron and Beco Steel

Can any of the company-specific risk be diversified away by investing in both ITTEFAQ Iron and Beco 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 ITTEFAQ Iron and Beco Steel 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 Beco Steel, you can compare the effects of market volatilities on ITTEFAQ Iron and Beco 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 ITTEFAQ Iron with a short position of Beco Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITTEFAQ Iron and Beco Steel.

Diversification Opportunities for ITTEFAQ Iron and Beco Steel

0.76

Correlation Coefficient

ITTEFAQ Iron  Beco Steel

Poor diversification

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

Pair Corralation between ITTEFAQ Iron and Beco Steel

Assuming the 90 days trading horizon ITTEFAQ Iron Industries is expected to generate 1.1 times more return on investment than Beco Steel. However, ITTEFAQ Iron is 1.1 times more volatile than Beco Steel. It trades about 0.05 of its potential returns per unit of risk. Beco Steel is currently generating about 0.02 per unit of risk. If you would invest  512.00  in ITTEFAQ Iron Industries on October 24, 2024 and sell it today you would earn a total of  325.00  from holding ITTEFAQ Iron Industries or generate 63.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

ITTEFAQ Iron Industries  vs.  Beco Steel

ITTEFAQ Iron Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ITTEFAQ Iron Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, ITTEFAQ Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Beco Steel

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beco Steel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beco Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ITTEFAQ Iron and Beco Steel

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

The idea behind ITTEFAQ Iron Industries and Beco Steel 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.