Correlation Between STEEL EXCHANGE and HDFC Asset

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

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

Diversification Opportunities for STEEL EXCHANGE and HDFC Asset

0.82

Correlation Coefficient

STEEL EXCHANGE  HDFC Asset

Very poor diversification

The 3 months correlation between STEEL and HDFC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding STEEL EXCHANGE INDIA 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 STEEL EXCHANGE 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 STEEL EXCHANGE INDIA 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 STEEL EXCHANGE i.e., STEEL EXCHANGE and HDFC Asset go up and down completely randomly.

Pair Corralation between STEEL EXCHANGE and HDFC Asset

Assuming the 90 days trading horizon STEEL EXCHANGE INDIA is expected to generate 1.64 times more return on investment than HDFC Asset. However, STEEL EXCHANGE is 1.64 times more volatile than HDFC Asset Management. It trades about -0.02 of its potential returns per unit of risk. HDFC Asset Management is currently generating about -0.24 per unit of risk. If you would invest  1,045  in STEEL EXCHANGE INDIA on October 27, 2024 and sell it today you would lose (20.00) from holding STEEL EXCHANGE INDIA or give up 1.91% of portfolio value over 90 days.

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

STEEL EXCHANGE INDIA  vs.  HDFC Asset Management

STEEL EXCHANGE INDIA

Risk-Adjusted Performance

0 of 100

Very Weak

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

HDFC Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HDFC Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with STEEL EXCHANGE and HDFC Asset

The main advantage of trading using opposite STEEL EXCHANGE and HDFC Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEEL EXCHANGE 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 STEEL EXCHANGE INDIA 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.