Correlation Between JSW Steel and Kewal Kiran

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

Diversification Opportunities for JSW Steel and Kewal Kiran

0.6

Correlation Coefficient

JSW Steel  Kewal Kiran

Poor diversification

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

Pair Corralation between JSW Steel and Kewal Kiran

Assuming the 90 days trading horizon JSW Steel Limited is expected to under-perform the Kewal Kiran. In addition to that, JSW Steel is 1.25 times more volatile than Kewal Kiran Clothing. It trades about 0.0 of its total potential returns per unit of risk. Kewal Kiran Clothing is currently generating about 0.02 per unit of volatility. If you would invest  62,050  in Kewal Kiran Clothing on August 31, 2024 and sell it today you would earn a total of  245.00  from holding Kewal Kiran Clothing or generate 0.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

JSW Steel Limited  vs.  Kewal Kiran Clothing

JSW Steel Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Steel Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Kewal Kiran Clothing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kewal Kiran Clothing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Kewal Kiran is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with JSW Steel and Kewal Kiran

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

The idea behind JSW Steel Limited and Kewal Kiran Clothing 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.