Correlation Between PNC Infratech and SAL Steel

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

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

Diversification Opportunities for PNC Infratech and SAL Steel

0.31

Correlation Coefficient

PNC Infratech  SAL Steel

Weak diversification

The 3 months correlation between PNC and SAL is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding PNC Infratech Limited 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 PNC Infratech 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 PNC Infratech 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 PNC Infratech i.e., PNC Infratech and SAL Steel go up and down completely randomly.

Pair Corralation between PNC Infratech and SAL Steel

Assuming the 90 days trading horizon PNC Infratech Limited is expected to generate 0.83 times more return on investment than SAL Steel. However, PNC Infratech Limited is 1.2 times less risky than SAL Steel. It trades about 0.04 of its potential returns per unit of risk. SAL Steel Limited is currently generating about -0.1 per unit of risk. If you would invest  30,695  in PNC Infratech Limited on October 23, 2024 and sell it today you would earn a total of  460.00  from holding PNC Infratech Limited or generate 1.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PNC Infratech Limited  vs.  SAL Steel Limited

PNC Infratech Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PNC Infratech Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, PNC Infratech is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail 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 unsteady 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 PNC Infratech and SAL Steel

The main advantage of trading using opposite PNC Infratech and SAL Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PNC Infratech 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 PNC Infratech 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.