Correlation Between JSW Steel and PTC India

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

Diversification Opportunities for JSW Steel and PTC India

-0.77

Correlation Coefficient

JSW Steel  PTC India

Pay attention - limited upside

The 3 months correlation between JSW and PTC is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited and PTC India Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PTC India Financial 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 PTC India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PTC India Financial has no effect on the direction of JSW Steel i.e., JSW Steel and PTC India go up and down completely randomly.

Pair Corralation between JSW Steel and PTC India

Assuming the 90 days trading horizon JSW Steel Limited is expected to generate 0.41 times more return on investment than PTC India. However, JSW Steel Limited is 2.46 times less risky than PTC India. It trades about 0.16 of its potential returns per unit of risk. PTC India Financial is currently generating about -0.1 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	Weak
Accuracy	98.41%
Values	Daily Returns

JSW Steel Limited  vs.  PTC India Financial

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.

PTC India Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days PTC India Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with JSW Steel and PTC India

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

The idea behind JSW Steel Limited and PTC India Financial 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.