Correlation Between JSW Steel and Alkali Metals

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

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

Diversification Opportunities for JSW Steel and Alkali Metals

-0.77

Correlation Coefficient

JSW Steel  Alkali Metals

Pay attention - limited upside

The 3 months correlation between JSW and Alkali is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited and Alkali Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkali Metals Limited and JSW 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 JSW Steel Limited are associated (or correlated) with Alkali Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkali Metals Limited has no effect on the direction of JSW Steel i.e., JSW Steel and Alkali Metals go up and down completely randomly.

Pair Corralation between JSW Steel and Alkali Metals

Assuming the 90 days trading horizon JSW Steel Limited is expected to generate 0.42 times more return on investment than Alkali Metals. However, JSW Steel Limited is 2.36 times less risky than Alkali Metals. It trades about 0.19 of its potential returns per unit of risk. Alkali Metals Limited is currently generating about -0.13 per unit of risk. If you would invest  92,185  in JSW Steel Limited on December 25, 2024 and sell it today you would earn a total of  13,985  from holding JSW Steel Limited or generate 15.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

JSW Steel Limited  vs.  Alkali Metals Limited

JSW Steel Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Steel Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, JSW Steel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Alkali Metals Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alkali Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with JSW Steel and Alkali Metals

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

The idea behind JSW Steel Limited and Alkali Metals 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.