Correlation Between Rama Steel and Jindal Poly

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

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

Diversification Opportunities for Rama Steel and Jindal Poly

-0.08

Correlation Coefficient

Rama Steel  Jindal Poly

Good diversification

The 3 months correlation between Rama and Jindal is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Rama Steel Tubes and Jindal Poly Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jindal Poly Investment and Rama Steel 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 Rama Steel Tubes are associated (or correlated) with Jindal Poly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jindal Poly Investment has no effect on the direction of Rama Steel i.e., Rama Steel and Jindal Poly go up and down completely randomly.

Pair Corralation between Rama Steel and Jindal Poly

Assuming the 90 days trading horizon Rama Steel Tubes is expected to generate 4.35 times more return on investment than Jindal Poly. However, Rama Steel is 4.35 times more volatile than Jindal Poly Investment. It trades about 0.04 of its potential returns per unit of risk. Jindal Poly Investment is currently generating about 0.05 per unit of risk. If you would invest  1,183  in Rama Steel Tubes on October 24, 2024 and sell it today you would earn a total of  97.00  from holding Rama Steel Tubes or generate 8.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Rama Steel Tubes  vs.  Jindal Poly Investment

Rama Steel Tubes

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rama Steel Tubes are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Rama Steel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Jindal Poly Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Rama Steel and Jindal Poly

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

The idea behind Rama Steel Tubes and Jindal Poly Investment 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.