Correlation Between JSW Holdings and Mahamaya Steel

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

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

Diversification Opportunities for JSW Holdings and Mahamaya Steel

0.65

Correlation Coefficient

JSW Holdings  Mahamaya Steel

Poor diversification

The 3 months correlation between JSW and Mahamaya is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding JSW Holdings Limited and Mahamaya Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mahamaya Steel Industries and JSW Holdings 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 JSW Holdings Limited are associated (or correlated) with Mahamaya Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mahamaya Steel Industries has no effect on the direction of JSW Holdings i.e., JSW Holdings and Mahamaya Steel go up and down completely randomly.

Pair Corralation between JSW Holdings and Mahamaya Steel

Assuming the 90 days trading horizon JSW Holdings Limited is expected to generate 3.55 times more return on investment than Mahamaya Steel. However, JSW Holdings is 3.55 times more volatile than Mahamaya Steel Industries. It trades about 0.26 of its potential returns per unit of risk. Mahamaya Steel Industries is currently generating about -0.11 per unit of risk. If you would invest  1,015,550  in JSW Holdings Limited on September 5, 2024 and sell it today you would earn a total of  429,565  from holding JSW Holdings Limited or generate 42.3% return on investment over 90 days.

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

JSW Holdings Limited  vs.  Mahamaya Steel Industries

JSW Holdings Limited

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Holdings Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, JSW Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Mahamaya Steel Industries

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mahamaya Steel Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Mahamaya Steel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JSW Holdings and Mahamaya Steel

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

The idea behind JSW Holdings Limited and Mahamaya Steel Industries 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.