Correlation Between SAL Steel and PNC Infratech

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

Diversification Opportunities for SAL Steel and PNC Infratech

0.31

Correlation Coefficient

SAL Steel  PNC Infratech

Weak diversification

The 3 months correlation between SAL and PNC is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding SAL Steel Limited and PNC Infratech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Infratech 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 PNC Infratech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNC Infratech Limited has no effect on the direction of SAL Steel i.e., SAL Steel and PNC Infratech go up and down completely randomly.

Pair Corralation between SAL Steel and PNC Infratech

Assuming the 90 days trading horizon SAL Steel Limited is expected to under-perform the PNC Infratech. But the stock apears to be less risky and, when comparing its historical volatility, SAL Steel Limited is 1.0 times less risky than PNC Infratech. The stock trades about -0.08 of its potential returns per unit of risk. The PNC Infratech Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  33,235  in PNC Infratech Limited on October 23, 2024 and sell it today you would lose (2,080) from holding PNC Infratech Limited or give up 6.26% of portfolio value over 90 days.

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

SAL Steel Limited  vs.  PNC Infratech 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 unsteady 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.

PNC Infratech Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PNC Infratech Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, PNC Infratech is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SAL Steel and PNC Infratech

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

The idea behind SAL Steel Limited and PNC Infratech 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.