Correlation Between Jindal Steel and Malu Paper

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

By analyzing existing cross correlation between Jindal Steel Power and Malu Paper Mills, you can compare the effects of market volatilities on Jindal Steel and Malu Paper 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 Jindal Steel with a short position of Malu Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jindal Steel and Malu Paper.

Diversification Opportunities for Jindal Steel and Malu Paper

0.67

Correlation Coefficient

Jindal Steel  Malu Paper

Poor diversification

The 3 months correlation between Jindal and Malu is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Jindal Steel Power and Malu Paper Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malu Paper Mills and Jindal Steel 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 Jindal Steel Power are associated (or correlated) with Malu Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malu Paper Mills has no effect on the direction of Jindal Steel i.e., Jindal Steel and Malu Paper go up and down completely randomly.

Pair Corralation between Jindal Steel and Malu Paper

Assuming the 90 days trading horizon Jindal Steel is expected to generate 1.06 times less return on investment than Malu Paper. But when comparing it to its historical volatility, Jindal Steel Power is 1.84 times less risky than Malu Paper. It trades about 0.06 of its potential returns per unit of risk. Malu Paper Mills is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,265  in Malu Paper Mills on September 3, 2024 and sell it today you would earn a total of  1,243  from holding Malu Paper Mills or generate 38.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.18%
Values	Daily Returns

Jindal Steel Power  vs.  Malu Paper Mills

Jindal Steel Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jindal Steel Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Jindal Steel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Malu Paper Mills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Malu Paper Mills has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Malu Paper is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Jindal Steel and Malu Paper

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

The idea behind Jindal Steel Power and Malu Paper Mills 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 CEOs Directory module to screen CEOs from public companies around the world.