Correlation Between SBI Cards and Electrosteel Castings

Can any of the company-specific risk be diversified away by investing in both SBI Cards and Electrosteel Castings 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 SBI Cards and Electrosteel Castings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SBI Cards and and Electrosteel Castings Limited, you can compare the effects of market volatilities on SBI Cards and Electrosteel Castings 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 SBI Cards with a short position of Electrosteel Castings. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBI Cards and Electrosteel Castings.

Diversification Opportunities for SBI Cards and Electrosteel Castings

0.83

Correlation Coefficient

SBI Cards  Electrosteel Castings

Very poor diversification

The 3 months correlation between SBI and Electrosteel is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding SBI Cards and and Electrosteel Castings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electrosteel Castings and SBI Cards 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 SBI Cards and are associated (or correlated) with Electrosteel Castings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electrosteel Castings has no effect on the direction of SBI Cards i.e., SBI Cards and Electrosteel Castings go up and down completely randomly.

Pair Corralation between SBI Cards and Electrosteel Castings

Assuming the 90 days trading horizon SBI Cards is expected to generate 51.97 times less return on investment than Electrosteel Castings. But when comparing it to its historical volatility, SBI Cards and is 2.38 times less risky than Electrosteel Castings. It trades about 0.01 of its potential returns per unit of risk. Electrosteel Castings Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,297  in Electrosteel Castings Limited on October 5, 2024 and sell it today you would earn a total of  11,250  from holding Electrosteel Castings Limited or generate 341.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.33%
Values	Daily Returns

SBI Cards and  vs.  Electrosteel Castings Limited

SBI Cards

Risk-Adjusted Performance

0 of 100

Very Weak

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

Electrosteel Castings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electrosteel Castings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with SBI Cards and Electrosteel Castings

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

The idea behind SBI Cards and and Electrosteel Castings 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.