Correlation Between JSW Steel and Rail Vikas

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

Diversification Opportunities for JSW Steel and Rail Vikas

0.71

Correlation Coefficient

JSW Steel  Rail Vikas

Poor diversification

The 3 months correlation between JSW and Rail is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited and Rail Vikas Nigam in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rail Vikas Nigam 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 Rail Vikas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rail Vikas Nigam has no effect on the direction of JSW Steel i.e., JSW Steel and Rail Vikas go up and down completely randomly.

Pair Corralation between JSW Steel and Rail Vikas

Assuming the 90 days trading horizon JSW Steel is expected to generate 6.95 times less return on investment than Rail Vikas. But when comparing it to its historical volatility, JSW Steel Limited is 2.3 times less risky than Rail Vikas. It trades about 0.04 of its potential returns per unit of risk. Rail Vikas Nigam is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  18,458  in Rail Vikas Nigam on October 5, 2024 and sell it today you would earn a total of  24,497  from holding Rail Vikas Nigam or generate 132.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.59%
Values	Daily Returns

JSW Steel Limited  vs.  Rail Vikas Nigam

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 uncertain 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.

Rail Vikas Nigam

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with JSW Steel and Rail Vikas

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

The idea behind JSW Steel Limited and Rail Vikas Nigam 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.