Correlation Between Steelcast and S P

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

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

Diversification Opportunities for Steelcast and S P

0.65

Correlation Coefficient

Steelcast  S P

Poor diversification

The 3 months correlation between Steelcast and SPAL is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Steelcast Limited and S P Apparels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S P Apparels 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 S P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S P Apparels has no effect on the direction of Steelcast i.e., Steelcast and S P go up and down completely randomly.

Pair Corralation between Steelcast and S P

Assuming the 90 days trading horizon Steelcast Limited is expected to generate 1.14 times more return on investment than S P. However, Steelcast is 1.14 times more volatile than S P Apparels. It trades about 0.12 of its potential returns per unit of risk. S P Apparels is currently generating about 0.04 per unit of risk. If you would invest  74,606  in Steelcast Limited on October 7, 2024 and sell it today you would earn a total of  13,599  from holding Steelcast Limited or generate 18.23% return on investment over 90 days.

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

Steelcast Limited  vs.  S P Apparels

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.

S P Apparels

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in S P Apparels are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, S P is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Steelcast and S P

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

The idea behind Steelcast Limited and S P Apparels 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.