Correlation Between JSW Steel and Biofil Chemicals

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

Diversification Opportunities for JSW Steel and Biofil Chemicals

0.75

Correlation Coefficient

JSW Steel  Biofil Chemicals

Poor diversification

The 3 months correlation between JSW and Biofil is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited and Biofil Chemicals Pharmaceutica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biofil Chemicals Pha 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 Biofil Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biofil Chemicals Pha has no effect on the direction of JSW Steel i.e., JSW Steel and Biofil Chemicals go up and down completely randomly.

Pair Corralation between JSW Steel and Biofil Chemicals

Assuming the 90 days trading horizon JSW Steel Limited is expected to generate 0.55 times more return on investment than Biofil Chemicals. However, JSW Steel Limited is 1.83 times less risky than Biofil Chemicals. It trades about -0.06 of its potential returns per unit of risk. Biofil Chemicals Pharmaceuticals is currently generating about -0.07 per unit of risk. If you would invest  96,365  in JSW Steel Limited on October 22, 2024 and sell it today you would lose (5,505) from holding JSW Steel Limited or give up 5.71% of portfolio value over 90 days.

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

JSW Steel Limited  vs.  Biofil Chemicals Pharmaceutica

JSW Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JSW Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, JSW Steel is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Biofil Chemicals Pha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biofil Chemicals Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical 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 JSW Steel and Biofil Chemicals

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

The idea behind JSW Steel Limited and Biofil Chemicals Pharmaceuticals 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.