Correlation Between Jai Balaji and Steel Authority

Can any of the company-specific risk be diversified away by investing in both Jai Balaji and Steel Authority 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 Steel Authority 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 Steel Authority of, you can compare the effects of market volatilities on Jai Balaji and Steel Authority 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 Steel Authority. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jai Balaji and Steel Authority.

Diversification Opportunities for Jai Balaji and Steel Authority

0.63

Correlation Coefficient

Jai Balaji  Steel Authority

Poor diversification

The 3 months correlation between Jai and Steel is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Jai Balaji Industries and Steel Authority of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Authority 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 Steel Authority. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Authority has no effect on the direction of Jai Balaji i.e., Jai Balaji and Steel Authority go up and down completely randomly.

Pair Corralation between Jai Balaji and Steel Authority

Assuming the 90 days trading horizon Jai Balaji Industries is expected to generate 1.2 times more return on investment than Steel Authority. However, Jai Balaji is 1.2 times more volatile than Steel Authority of. It trades about -0.07 of its potential returns per unit of risk. Steel Authority of is currently generating about -0.11 per unit of risk. If you would invest  101,705  in Jai Balaji Industries on October 5, 2024 and sell it today you would lose (11,435) from holding Jai Balaji Industries or give up 11.24% of portfolio value over 90 days.

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

Jai Balaji Industries  vs.  Steel Authority of

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 inconsistent 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.

Steel Authority

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steel Authority of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Jai Balaji and Steel Authority

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

The idea behind Jai Balaji Industries and Steel Authority of 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.