Correlation Between Steelcast and Malu Paper

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

By analyzing existing cross correlation between Steelcast Limited and Malu Paper Mills, you can compare the effects of market volatilities on Steelcast and Malu Paper 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 Malu Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steelcast and Malu Paper.

Diversification Opportunities for Steelcast and Malu Paper

0.21

Correlation Coefficient

Steelcast  Malu Paper

Modest diversification

The 3 months correlation between Steelcast and Malu is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Steelcast Limited and Malu Paper Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malu Paper Mills 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 Malu Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malu Paper Mills has no effect on the direction of Steelcast i.e., Steelcast and Malu Paper go up and down completely randomly.

Pair Corralation between Steelcast and Malu Paper

Assuming the 90 days trading horizon Steelcast Limited is expected to generate 0.79 times more return on investment than Malu Paper. However, Steelcast Limited is 1.26 times less risky than Malu Paper. It trades about 0.09 of its potential returns per unit of risk. Malu Paper Mills is currently generating about 0.01 per unit of risk. If you would invest  75,544  in Steelcast Limited on October 22, 2024 and sell it today you would earn a total of  9,531  from holding Steelcast Limited or generate 12.62% return on investment over 90 days.

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

Steelcast Limited  vs.  Malu Paper Mills

Steelcast Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Steelcast Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Steelcast sustained solid returns over the last few months and may actually be approaching a breakup point.

Malu Paper Mills

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Malu Paper Mills are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Malu Paper is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Steelcast and Malu Paper

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

The idea behind Steelcast Limited and Malu Paper Mills 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.