Correlation Between State Trading and Rama Steel

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

By analyzing existing cross correlation between The State Trading and Rama Steel Tubes, you can compare the effects of market volatilities on State Trading and Rama Steel 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 State Trading with a short position of Rama Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Trading and Rama Steel.

Diversification Opportunities for State Trading and Rama Steel

0.61

Correlation Coefficient

State Trading  Rama Steel

Poor diversification

The 3 months correlation between State and Rama is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding The State Trading and Rama Steel Tubes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rama Steel Tubes and State Trading 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 The State Trading are associated (or correlated) with Rama Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rama Steel Tubes has no effect on the direction of State Trading i.e., State Trading and Rama Steel go up and down completely randomly.

Pair Corralation between State Trading and Rama Steel

Assuming the 90 days trading horizon The State Trading is expected to generate 1.28 times more return on investment than Rama Steel. However, State Trading is 1.28 times more volatile than Rama Steel Tubes. It trades about -0.01 of its potential returns per unit of risk. Rama Steel Tubes is currently generating about -0.1 per unit of risk. If you would invest  16,513  in The State Trading on October 9, 2024 and sell it today you would lose (936.00) from holding The State Trading or give up 5.67% of portfolio value over 90 days.

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

The State Trading  vs.  Rama Steel Tubes

State Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The State Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, State Trading is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Rama Steel Tubes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rama Steel Tubes 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.

Pair Trading with State Trading and Rama Steel

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

The idea behind The State Trading and Rama Steel Tubes 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.