Correlation Between Steel Authority and JSW Holdings

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

Diversification Opportunities for Steel Authority and JSW Holdings

-0.72

Correlation Coefficient

Steel Authority  JSW Holdings

Pay attention - limited upside

The 3 months correlation between Steel and JSW is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and JSW Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSW Holdings 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 JSW Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSW Holdings Limited has no effect on the direction of Steel Authority i.e., Steel Authority and JSW Holdings go up and down completely randomly.

Pair Corralation between Steel Authority and JSW Holdings

Assuming the 90 days trading horizon Steel Authority of is expected to under-perform the JSW Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Steel Authority of is 2.41 times less risky than JSW Holdings. The stock trades about -0.04 of its potential returns per unit of risk. The JSW Holdings Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  758,940  in JSW Holdings Limited on September 5, 2024 and sell it today you would earn a total of  686,175  from holding JSW Holdings Limited or generate 90.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Steel Authority of  vs.  JSW Holdings 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 comparatively stable basic indicators, Steel Authority is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

JSW Holdings Limited

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Holdings Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, JSW Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Authority and JSW Holdings

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

The idea behind Steel Authority of and JSW Holdings 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.

Check out your portfolio center.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.