Correlation Between SAL Steel and Kalyani Steels

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

Diversification Opportunities for SAL Steel and Kalyani Steels

-0.43

Correlation Coefficient

SAL Steel  Kalyani Steels

Very good diversification

The 3 months correlation between SAL and Kalyani is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding SAL Steel Limited and Kalyani Steels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kalyani Steels 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 Kalyani Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kalyani Steels has no effect on the direction of SAL Steel i.e., SAL Steel and Kalyani Steels go up and down completely randomly.

Pair Corralation between SAL Steel and Kalyani Steels

Assuming the 90 days trading horizon SAL Steel Limited is expected to under-perform the Kalyani Steels. But the stock apears to be less risky and, when comparing its historical volatility, SAL Steel Limited is 1.04 times less risky than Kalyani Steels. The stock trades about -0.06 of its potential returns per unit of risk. The Kalyani Steels Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  75,810  in Kalyani Steels Limited on October 27, 2024 and sell it today you would earn a total of  17,115  from holding Kalyani Steels Limited or generate 22.58% return on investment over 90 days.

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

SAL Steel Limited  vs.  Kalyani Steels 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 latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Kalyani Steels

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kalyani Steels Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Kalyani Steels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SAL Steel and Kalyani Steels

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

The idea behind SAL Steel Limited and Kalyani Steels 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..