Correlation Between JSW Steel and Pilani Investment

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

Diversification Opportunities for JSW Steel and Pilani Investment

-0.18

Correlation Coefficient

JSW Steel  Pilani Investment

Good diversification

The 3 months correlation between JSW and Pilani is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited and Pilani Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pilani Investment 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 Pilani Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pilani Investment has no effect on the direction of JSW Steel i.e., JSW Steel and Pilani Investment go up and down completely randomly.

Pair Corralation between JSW Steel and Pilani Investment

Assuming the 90 days trading horizon JSW Steel is expected to generate 7.41 times less return on investment than Pilani Investment. But when comparing it to its historical volatility, JSW Steel Limited is 1.9 times less risky than Pilani Investment. It trades about 0.03 of its potential returns per unit of risk. Pilani Investment and is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  187,543  in Pilani Investment and on October 4, 2024 and sell it today you would earn a total of  355,817  from holding Pilani Investment and or generate 189.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.73%
Values	Daily Returns

JSW Steel Limited  vs.  Pilani Investment and

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pilani Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pilani Investment and are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Pilani Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with JSW Steel and Pilani Investment

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

The idea behind JSW Steel Limited and Pilani Investment and 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.