Correlation Between Pilani Investment and Steelcast

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

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

Diversification Opportunities for Pilani Investment and Steelcast

-0.27

Correlation Coefficient

Pilani Investment  Steelcast

Very good diversification

The 3 months correlation between Pilani and Steelcast is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Pilani Investment and and Steelcast Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steelcast Limited and Pilani Investment 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 Pilani Investment and are associated (or correlated) with Steelcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steelcast Limited has no effect on the direction of Pilani Investment i.e., Pilani Investment and Steelcast go up and down completely randomly.

Pair Corralation between Pilani Investment and Steelcast

Assuming the 90 days trading horizon Pilani Investment is expected to generate 2.12 times less return on investment than Steelcast. In addition to that, Pilani Investment is 1.62 times more volatile than Steelcast Limited. It trades about 0.04 of its total potential returns per unit of risk. Steelcast Limited is currently generating about 0.13 per unit of volatility. If you would invest  74,940  in Steelcast Limited on October 8, 2024 and sell it today you would earn a total of  14,785  from holding Steelcast Limited or generate 19.73% return on investment over 90 days.

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

Pilani Investment and  vs.  Steelcast Limited

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 weak basic indicators, Pilani Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Steelcast Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steelcast Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Steelcast sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pilani Investment and Steelcast

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

The idea behind Pilani Investment and and Steelcast 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.