Correlation Between SAL Steel and KIOCL

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

Diversification Opportunities for SAL Steel and KIOCL

0.21

Correlation Coefficient

SAL Steel  KIOCL

Modest diversification

The 3 months correlation between SAL and KIOCL is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding SAL Steel Limited and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited 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 KIOCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIOCL Limited has no effect on the direction of SAL Steel i.e., SAL Steel and KIOCL go up and down completely randomly.

Pair Corralation between SAL Steel and KIOCL

Assuming the 90 days trading horizon SAL Steel Limited is expected to generate 0.85 times more return on investment than KIOCL. However, SAL Steel Limited is 1.18 times less risky than KIOCL. It trades about 0.04 of its potential returns per unit of risk. KIOCL Limited is currently generating about 0.01 per unit of risk. If you would invest  2,173  in SAL Steel Limited on October 3, 2024 and sell it today you would earn a total of  144.00  from holding SAL Steel Limited or generate 6.63% return on investment over 90 days.

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

SAL Steel Limited  vs.  KIOCL Limited

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

KIOCL Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KIOCL Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, KIOCL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SAL Steel and KIOCL

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

The idea behind SAL Steel Limited and KIOCL 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.