Correlation Between Jindal Steel and MRF

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

Diversification Opportunities for Jindal Steel and MRF

0.34

Correlation Coefficient

Jindal Steel  MRF

Weak diversification

The 3 months correlation between Jindal and MRF is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Jindal Steel Power and MRF Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRF Limited 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 MRF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRF Limited has no effect on the direction of Jindal Steel i.e., Jindal Steel and MRF go up and down completely randomly.

Pair Corralation between Jindal Steel and MRF

Assuming the 90 days trading horizon Jindal Steel Power is expected to generate 1.46 times more return on investment than MRF. However, Jindal Steel is 1.46 times more volatile than MRF Limited. It trades about 0.02 of its potential returns per unit of risk. MRF Limited is currently generating about -0.13 per unit of risk. If you would invest  91,050  in Jindal Steel Power on October 22, 2024 and sell it today you would earn a total of  1,415  from holding Jindal Steel Power or generate 1.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Jindal Steel Power  vs.  MRF Limited

Jindal Steel Power

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jindal Steel Power are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Jindal Steel is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

MRF Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MRF Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating 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 Jindal Steel and MRF

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

The idea behind Jindal Steel Power and MRF Limited 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.