Correlation Between LT Technology and SAL Steel

Can any of the company-specific risk be diversified away by investing in both LT Technology and SAL Steel 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 LT Technology and SAL Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LT Technology Services and SAL Steel Limited, you can compare the effects of market volatilities on LT Technology and SAL Steel 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 LT Technology with a short position of SAL Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of LT Technology and SAL Steel.

Diversification Opportunities for LT Technology and SAL Steel

0.41

Correlation Coefficient

LT Technology  SAL Steel

Very weak diversification

The 3 months correlation between LTTS and SAL is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding LT Technology Services and SAL Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAL Steel Limited and LT Technology 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 LT Technology Services are associated (or correlated) with SAL Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAL Steel Limited has no effect on the direction of LT Technology i.e., LT Technology and SAL Steel go up and down completely randomly.

Pair Corralation between LT Technology and SAL Steel

Assuming the 90 days trading horizon LT Technology Services is expected to under-perform the SAL Steel. But the stock apears to be less risky and, when comparing its historical volatility, LT Technology Services is 1.57 times less risky than SAL Steel. The stock trades about -0.34 of its potential returns per unit of risk. The SAL Steel Limited is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,387  in SAL Steel Limited on October 3, 2024 and sell it today you would lose (70.00) from holding SAL Steel Limited or give up 2.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

LT Technology Services  vs.  SAL Steel Limited

LT Technology Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LT Technology Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

SAL Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAL 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.

Pair Trading with LT Technology and SAL Steel

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

The idea behind LT Technology Services and SAL Steel 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.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.