Correlation Between Metalyst Forgings and JSW Steel

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

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

Diversification Opportunities for Metalyst Forgings and JSW Steel

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Correlation Coefficient

Metalyst Forgings  JSW Steel

Pay attention - limited upside

The 3 months correlation between Metalyst and JSW is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Metalyst Forgings Limited and JSW Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSW Steel Limited and Metalyst Forgings 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 Metalyst Forgings Limited are associated (or correlated) with JSW Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSW Steel Limited has no effect on the direction of Metalyst Forgings i.e., Metalyst Forgings and JSW Steel go up and down completely randomly.

Pair Corralation between Metalyst Forgings and JSW Steel

Assuming the 90 days trading horizon Metalyst Forgings is expected to generate 1.31 times less return on investment than JSW Steel. In addition to that, Metalyst Forgings is 1.65 times more volatile than JSW Steel Limited. It trades about 0.02 of its total potential returns per unit of risk. JSW Steel Limited is currently generating about 0.03 per unit of volatility. If you would invest  74,520  in JSW Steel Limited on October 2, 2024 and sell it today you would earn a total of  15,630  from holding JSW Steel Limited or generate 20.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Metalyst Forgings Limited  vs.  JSW Steel Limited

Metalyst Forgings

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Metalyst Forgings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Metalyst Forgings is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Metalyst Forgings and JSW Steel

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

The idea behind Metalyst Forgings Limited and JSW 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.