Correlation Between Paramount Communications and SAL Steel

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

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

Diversification Opportunities for Paramount Communications and SAL Steel

0.0

Correlation Coefficient

Paramount Communications  SAL Steel

Pay attention - limited upside

The 3 months correlation between Paramount and SAL is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Communications Limit 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 Paramount Communications 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 Paramount Communications Limited 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 Paramount Communications i.e., Paramount Communications and SAL Steel go up and down completely randomly.

Pair Corralation between Paramount Communications and SAL Steel

Assuming the 90 days trading horizon Paramount Communications Limited is expected to generate 1.04 times more return on investment than SAL Steel. However, Paramount Communications is 1.04 times more volatile than SAL Steel Limited. It trades about 0.03 of its potential returns per unit of risk. SAL Steel Limited is currently generating about -0.15 per unit of risk. If you would invest  7,806  in Paramount Communications Limited on October 9, 2024 and sell it today you would earn a total of  263.00  from holding Paramount Communications Limited or generate 3.37% return on investment over 90 days.

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

Paramount Communications Limit  vs.  SAL Steel Limited

Paramount Communications

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Communications Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Paramount Communications is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the 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 Paramount Communications and SAL Steel

The main advantage of trading using opposite Paramount Communications and SAL Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paramount Communications 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 Paramount Communications Limited 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.