Correlation Between JSW Steel and Oil Natural

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

Diversification Opportunities for JSW Steel and Oil Natural

-0.58

Correlation Coefficient

JSW Steel  Oil Natural

Excellent diversification

The 3 months correlation between JSW and Oil is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited and Oil Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Natural Gas 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 Oil Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Natural Gas has no effect on the direction of JSW Steel i.e., JSW Steel and Oil Natural go up and down completely randomly.

Pair Corralation between JSW Steel and Oil Natural

Assuming the 90 days trading horizon JSW Steel Limited is expected to generate 0.62 times more return on investment than Oil Natural. However, JSW Steel Limited is 1.6 times less risky than Oil Natural. It trades about 0.16 of its potential returns per unit of risk. Oil Natural Gas is currently generating about 0.03 per unit of risk. If you would invest  93,705  in JSW Steel Limited on December 23, 2024 and sell it today you would earn a total of  12,165  from holding JSW Steel Limited or generate 12.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

JSW Steel Limited  vs.  Oil Natural Gas

JSW Steel Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Steel Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, JSW Steel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Oil Natural Gas

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Natural Gas are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Oil Natural is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with JSW Steel and Oil Natural

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

The idea behind JSW Steel Limited and Oil Natural Gas 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.