Correlation Between JSW Steel and Global Health

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

Diversification Opportunities for JSW Steel and Global Health

-0.27

Correlation Coefficient

JSW Steel  Global Health

Very good diversification

The 3 months correlation between JSW and Global is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited and Global Health Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Health 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 Global Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Health Limited has no effect on the direction of JSW Steel i.e., JSW Steel and Global Health go up and down completely randomly.

Pair Corralation between JSW Steel and Global Health

Assuming the 90 days trading horizon JSW Steel Limited is expected to under-perform the Global Health. But the stock apears to be less risky and, when comparing its historical volatility, JSW Steel Limited is 1.24 times less risky than Global Health. The stock trades about -0.11 of its potential returns per unit of risk. The Global Health Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  96,690  in Global Health Limited on October 7, 2024 and sell it today you would earn a total of  12,220  from holding Global Health Limited or generate 12.64% return on investment over 90 days.

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

JSW Steel Limited  vs.  Global Health 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 unsteady 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.

Global Health Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Health Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Global Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JSW Steel and Global Health

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

The idea behind JSW Steel Limited and Global Health 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.