Correlation Between Jai Balaji and Rama Steel

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

By analyzing existing cross correlation between Jai Balaji Industries and Rama Steel Tubes, you can compare the effects of market volatilities on Jai Balaji and Rama 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 Jai Balaji with a short position of Rama Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jai Balaji and Rama Steel.

Diversification Opportunities for Jai Balaji and Rama Steel

0.78

Correlation Coefficient

Jai Balaji  Rama Steel

Poor diversification

The 3 months correlation between Jai and Rama is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Jai Balaji Industries and Rama Steel Tubes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rama Steel Tubes and Jai Balaji 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 Jai Balaji Industries are associated (or correlated) with Rama Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rama Steel Tubes has no effect on the direction of Jai Balaji i.e., Jai Balaji and Rama Steel go up and down completely randomly.

Pair Corralation between Jai Balaji and Rama Steel

Assuming the 90 days trading horizon Jai Balaji is expected to generate 1.74 times less return on investment than Rama Steel. But when comparing it to its historical volatility, Jai Balaji Industries is 1.5 times less risky than Rama Steel. It trades about 0.02 of its potential returns per unit of risk. Rama Steel Tubes is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,252  in Rama Steel Tubes on October 6, 2024 and sell it today you would lose (25.00) from holding Rama Steel Tubes or give up 2.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.59%
Values	Daily Returns

Jai Balaji Industries  vs.  Rama Steel Tubes

Jai Balaji Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jai Balaji Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Rama Steel Tubes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rama Steel Tubes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Jai Balaji and Rama Steel

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

The idea behind Jai Balaji Industries and Rama Steel Tubes 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.