Correlation Between Steel Authority and Vidhi Specialty

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

Diversification Opportunities for Steel Authority and Vidhi Specialty

0.56

Correlation Coefficient

Steel Authority  Vidhi Specialty

Very weak diversification

The 3 months correlation between Steel and Vidhi is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and Vidhi Specialty Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vidhi Specialty Food 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 Vidhi Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vidhi Specialty Food has no effect on the direction of Steel Authority i.e., Steel Authority and Vidhi Specialty go up and down completely randomly.

Pair Corralation between Steel Authority and Vidhi Specialty

Assuming the 90 days trading horizon Steel Authority of is expected to under-perform the Vidhi Specialty. But the stock apears to be less risky and, when comparing its historical volatility, Steel Authority of is 1.43 times less risky than Vidhi Specialty. The stock trades about -0.07 of its potential returns per unit of risk. The Vidhi Specialty Food is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  48,549  in Vidhi Specialty Food on December 1, 2024 and sell it today you would lose (4,224) from holding Vidhi Specialty Food or give up 8.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Steel Authority of  vs.  Vidhi Specialty Food

Steel Authority

Risk-Adjusted Performance

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 latest uncertain 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.

Vidhi Specialty Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vidhi Specialty Food has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Vidhi Specialty is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Steel Authority and Vidhi Specialty

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

The idea behind Steel Authority of and Vidhi Specialty Food 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.