Correlation Between JSW Steel and Vodafone Idea

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

Diversification Opportunities for JSW Steel and Vodafone Idea

0.6

Correlation Coefficient

JSW Steel  Vodafone Idea

Poor diversification

The 3 months correlation between JSW and Vodafone is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited and Vodafone Idea Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Idea 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 Vodafone Idea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Idea Limited has no effect on the direction of JSW Steel i.e., JSW Steel and Vodafone Idea go up and down completely randomly.

Pair Corralation between JSW Steel and Vodafone Idea

Assuming the 90 days trading horizon JSW Steel Limited is expected to under-perform the Vodafone Idea. But the stock apears to be less risky and, when comparing its historical volatility, JSW Steel Limited is 1.64 times less risky than Vodafone Idea. The stock trades about -0.34 of its potential returns per unit of risk. The Vodafone Idea Limited is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  842.00  in Vodafone Idea Limited on October 5, 2024 and sell it today you would lose (28.00) from holding Vodafone Idea Limited or give up 3.33% 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.  Vodafone Idea Limited

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 latest uncertain 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.

Vodafone Idea Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodafone Idea Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with JSW Steel and Vodafone Idea

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

The idea behind JSW Steel Limited and Vodafone Idea 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.