Correlation Between SAL Steel and Himadri Speciality

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

By analyzing existing cross correlation between SAL Steel Limited and Himadri Speciality Chemical, you can compare the effects of market volatilities on SAL Steel and Himadri Speciality 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 SAL Steel with a short position of Himadri Speciality. Check out your portfolio center. Please also check ongoing floating volatility patterns of SAL Steel and Himadri Speciality.

Diversification Opportunities for SAL Steel and Himadri Speciality

0.72

Correlation Coefficient

SAL Steel  Himadri Speciality

Poor diversification

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

Pair Corralation between SAL Steel and Himadri Speciality

Assuming the 90 days trading horizon SAL Steel Limited is expected to under-perform the Himadri Speciality. In addition to that, SAL Steel is 1.19 times more volatile than Himadri Speciality Chemical. It trades about -0.03 of its total potential returns per unit of risk. Himadri Speciality Chemical is currently generating about 0.01 per unit of volatility. If you would invest  57,380  in Himadri Speciality Chemical on September 13, 2024 and sell it today you would lose (485.00) from holding Himadri Speciality Chemical or give up 0.85% of portfolio value over 90 days.

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

SAL Steel Limited  vs.  Himadri Speciality Chemical

SAL Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAL Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SAL Steel is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Himadri Speciality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Himadri Speciality Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Himadri Speciality is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SAL Steel and Himadri Speciality

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

The idea behind SAL Steel Limited and Himadri Speciality Chemical 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.