Correlation Between Rama Steel and Syrma SGS

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

Diversification Opportunities for Rama Steel and Syrma SGS

-0.46

Correlation Coefficient

Rama Steel  Syrma SGS

Very good diversification

The 3 months correlation between Rama and Syrma is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Rama Steel Tubes and Syrma SGS Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Syrma SGS Technology 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 Syrma SGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Syrma SGS Technology has no effect on the direction of Rama Steel i.e., Rama Steel and Syrma SGS go up and down completely randomly.

Pair Corralation between Rama Steel and Syrma SGS

Assuming the 90 days trading horizon Rama Steel Tubes is expected to under-perform the Syrma SGS. But the stock apears to be less risky and, when comparing its historical volatility, Rama Steel Tubes is 2.19 times less risky than Syrma SGS. The stock trades about -0.44 of its potential returns per unit of risk. The Syrma SGS Technology is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  55,595  in Syrma SGS Technology on October 8, 2024 and sell it today you would earn a total of  7,165  from holding Syrma SGS Technology or generate 12.89% return on investment over 90 days.

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

Rama Steel Tubes  vs.  Syrma SGS Technology

Rama Steel Tubes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rama Steel Tubes 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.

Syrma SGS Technology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Syrma SGS Technology are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Syrma SGS displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rama Steel and Syrma SGS

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

The idea behind Rama Steel Tubes and Syrma SGS Technology 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.