Correlation Between Rama Steel and Summit Securities

Can any of the company-specific risk be diversified away by investing in both Rama Steel and Summit Securities 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 Summit Securities 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 Summit Securities Limited, you can compare the effects of market volatilities on Rama Steel and Summit Securities 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 Summit Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rama Steel and Summit Securities.

Diversification Opportunities for Rama Steel and Summit Securities

0.16

Correlation Coefficient

Rama Steel  Summit Securities

Average diversification

The 3 months correlation between Rama and Summit is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Rama Steel Tubes and Summit Securities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Securities 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 Summit Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Securities has no effect on the direction of Rama Steel i.e., Rama Steel and Summit Securities go up and down completely randomly.

Pair Corralation between Rama Steel and Summit Securities

Assuming the 90 days trading horizon Rama Steel Tubes is expected to generate 0.84 times more return on investment than Summit Securities. However, Rama Steel Tubes is 1.19 times less risky than Summit Securities. It trades about 0.05 of its potential returns per unit of risk. Summit Securities Limited is currently generating about -0.02 per unit of risk. If you would invest  1,194  in Rama Steel Tubes on October 25, 2024 and sell it today you would earn a total of  76.00  from holding Rama Steel Tubes or generate 6.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Rama Steel Tubes  vs.  Summit Securities Limited

Rama Steel Tubes

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rama Steel Tubes are ranked lower than 3 (%) 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.

Summit Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summit Securities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Summit Securities is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Rama Steel and Summit Securities

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

The idea behind Rama Steel Tubes and Summit Securities 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.