Correlation Between Steel Authority and Gujarat Narmada

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

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

Diversification Opportunities for Steel Authority and Gujarat Narmada

0.87

Correlation Coefficient

Steel Authority  Gujarat Narmada

Very poor diversification

The 3 months correlation between Steel and Gujarat is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and Gujarat Narmada Valley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Narmada Valley and Steel Authority 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 Steel Authority of are associated (or correlated) with Gujarat Narmada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Narmada Valley has no effect on the direction of Steel Authority i.e., Steel Authority and Gujarat Narmada go up and down completely randomly.

Pair Corralation between Steel Authority and Gujarat Narmada

Assuming the 90 days trading horizon Steel Authority of is expected to under-perform the Gujarat Narmada. In addition to that, Steel Authority is 1.01 times more volatile than Gujarat Narmada Valley. It trades about -0.1 of its total potential returns per unit of risk. Gujarat Narmada Valley is currently generating about -0.09 per unit of volatility. If you would invest  69,415  in Gujarat Narmada Valley on August 31, 2024 and sell it today you would lose (7,990) from holding Gujarat Narmada Valley or give up 11.51% of portfolio value over 90 days.

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

Steel Authority of  vs.  Gujarat Narmada Valley

Steel Authority

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steel Authority of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Gujarat Narmada Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gujarat Narmada Valley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Steel Authority and Gujarat Narmada

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

The idea behind Steel Authority of and Gujarat Narmada Valley 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.