Correlation Between Steel Authority and Jai Balaji

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

Diversification Opportunities for Steel Authority and Jai Balaji

0.63

Correlation Coefficient

Steel Authority  Jai Balaji

Poor diversification

The 3 months correlation between Steel and Jai is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and Jai Balaji Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jai Balaji Industries 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 Jai Balaji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jai Balaji Industries has no effect on the direction of Steel Authority i.e., Steel Authority and Jai Balaji go up and down completely randomly.

Pair Corralation between Steel Authority and Jai Balaji

Assuming the 90 days trading horizon Steel Authority is expected to generate 6.78 times less return on investment than Jai Balaji. But when comparing it to its historical volatility, Steel Authority of is 1.25 times less risky than Jai Balaji. It trades about 0.04 of its potential returns per unit of risk. Jai Balaji Industries is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  5,560  in Jai Balaji Industries on October 5, 2024 and sell it today you would earn a total of  84,710  from holding Jai Balaji Industries or generate 1523.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.97%
Values	Daily Returns

Steel Authority of  vs.  Jai Balaji Industries

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 inconsistent 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.

Jai Balaji Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jai Balaji Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Steel Authority and Jai Balaji

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

The idea behind Steel Authority of and Jai Balaji Industries 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.