Correlation Between Steel Authority and Indo Amines

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

Diversification Opportunities for Steel Authority and Indo Amines

0.37

Correlation Coefficient

Steel Authority  Indo Amines

Weak diversification

The 3 months correlation between Steel and Indo is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and Indo Amines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Amines Limited 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 Indo Amines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Amines Limited has no effect on the direction of Steel Authority i.e., Steel Authority and Indo Amines go up and down completely randomly.

Pair Corralation between Steel Authority and Indo Amines

Assuming the 90 days trading horizon Steel Authority of is expected to generate 0.65 times more return on investment than Indo Amines. However, Steel Authority of is 1.54 times less risky than Indo Amines. It trades about -0.35 of its potential returns per unit of risk. Indo Amines Limited is currently generating about -0.32 per unit of risk. If you would invest  12,681  in Steel Authority of on October 11, 2024 and sell it today you would lose (1,705) from holding Steel Authority of or give up 13.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Steel Authority of  vs.  Indo Amines Limited

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 unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Indo Amines Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Amines Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Steel Authority and Indo Amines

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

The idea behind Steel Authority of and Indo Amines 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.