Correlation Between Steelcast and HDFC Asset

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

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

Diversification Opportunities for Steelcast and HDFC Asset

0.0

Correlation Coefficient

Steelcast  HDFC Asset

Pay attention - limited upside

The 3 months correlation between Steelcast and HDFC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Steelcast Limited and HDFC Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Asset Management and Steelcast 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 Steelcast Limited are associated (or correlated) with HDFC Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HDFC Asset Management has no effect on the direction of Steelcast i.e., Steelcast and HDFC Asset go up and down completely randomly.

Pair Corralation between Steelcast and HDFC Asset

Assuming the 90 days trading horizon Steelcast Limited is expected to generate 1.84 times more return on investment than HDFC Asset. However, Steelcast is 1.84 times more volatile than HDFC Asset Management. It trades about -0.03 of its potential returns per unit of risk. HDFC Asset Management is currently generating about -0.22 per unit of risk. If you would invest  89,790  in Steelcast Limited on October 8, 2024 and sell it today you would lose (1,585) from holding Steelcast Limited or give up 1.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Steelcast Limited  vs.  HDFC Asset Management

Steelcast Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steelcast Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental indicators, Steelcast sustained solid returns over the last few months and may actually be approaching a breakup point.

HDFC Asset Management

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HDFC Asset Management are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, HDFC Asset is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Steelcast and HDFC Asset

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

The idea behind Steelcast Limited and HDFC Asset Management 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.