Correlation Between JSW Steel and GPT Healthcare

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

Diversification Opportunities for JSW Steel and GPT Healthcare

0.46

Correlation Coefficient

JSW Steel  GPT Healthcare

Very weak diversification

The 3 months correlation between JSW and GPT is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited and GPT Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GPT Healthcare 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 GPT Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GPT Healthcare has no effect on the direction of JSW Steel i.e., JSW Steel and GPT Healthcare go up and down completely randomly.

Pair Corralation between JSW Steel and GPT Healthcare

Assuming the 90 days trading horizon JSW Steel Limited is expected to generate 0.61 times more return on investment than GPT Healthcare. However, JSW Steel Limited is 1.64 times less risky than GPT Healthcare. It trades about 0.05 of its potential returns per unit of risk. GPT Healthcare is currently generating about 0.0 per unit of risk. If you would invest  77,627  in JSW Steel Limited on September 21, 2024 and sell it today you would earn a total of  14,968  from holding JSW Steel Limited or generate 19.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	76.43%
Values	Daily Returns

JSW Steel Limited  vs.  GPT Healthcare

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

GPT Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GPT Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, GPT Healthcare is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with JSW Steel and GPT Healthcare

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

The idea behind JSW Steel Limited and GPT Healthcare 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.