Correlation Between Steelcast and Welspun Investments

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

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

Diversification Opportunities for Steelcast and Welspun Investments

-0.37

Correlation Coefficient

Steelcast  Welspun Investments

Very good diversification

The 3 months correlation between Steelcast and Welspun is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Steelcast Limited and Welspun Investments and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welspun Investments and 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 Welspun Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welspun Investments and has no effect on the direction of Steelcast i.e., Steelcast and Welspun Investments go up and down completely randomly.

Pair Corralation between Steelcast and Welspun Investments

Assuming the 90 days trading horizon Steelcast Limited is expected to generate 0.98 times more return on investment than Welspun Investments. However, Steelcast Limited is 1.02 times less risky than Welspun Investments. It trades about 0.12 of its potential returns per unit of risk. Welspun Investments and is currently generating about -0.07 per unit of risk. If you would invest  66,745  in Steelcast Limited on August 31, 2024 and sell it today you would earn a total of  13,400  from holding Steelcast Limited or generate 20.08% return on investment over 90 days.

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

Steelcast Limited  vs.  Welspun Investments and

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 uncertain fundamental indicators, Steelcast sustained solid returns over the last few months and may actually be approaching a breakup point.

Welspun Investments and

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Welspun Investments and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Steelcast and Welspun Investments

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

The idea behind Steelcast Limited and Welspun Investments and 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.