Correlation Between JSW Steel and Kingfa Science

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

Diversification Opportunities for JSW Steel and Kingfa Science

-0.42

Correlation Coefficient

JSW Steel  Kingfa Science

Very good diversification

The 3 months correlation between JSW and Kingfa is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited and Kingfa Science Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfa Science Technology 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 Kingfa Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingfa Science Technology has no effect on the direction of JSW Steel i.e., JSW Steel and Kingfa Science go up and down completely randomly.

Pair Corralation between JSW Steel and Kingfa Science

Assuming the 90 days trading horizon JSW Steel Limited is expected to under-perform the Kingfa Science. But the stock apears to be less risky and, when comparing its historical volatility, JSW Steel Limited is 1.89 times less risky than Kingfa Science. The stock trades about -0.03 of its potential returns per unit of risk. The Kingfa Science Technology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  305,305  in Kingfa Science Technology on October 23, 2024 and sell it today you would earn a total of  9,425  from holding Kingfa Science Technology or generate 3.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

JSW Steel Limited  vs.  Kingfa Science Technology

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

Kingfa Science Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfa Science Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Kingfa Science is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with JSW Steel and Kingfa Science

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

The idea behind JSW Steel Limited and Kingfa Science Technology 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.