Correlation Between STEEL EXCHANGE and Kalyani Steels

Can any of the company-specific risk be diversified away by investing in both STEEL EXCHANGE and Kalyani Steels 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 Kalyani Steels 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 Kalyani Steels Limited, you can compare the effects of market volatilities on STEEL EXCHANGE and Kalyani Steels 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 Kalyani Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of STEEL EXCHANGE and Kalyani Steels.

Diversification Opportunities for STEEL EXCHANGE and Kalyani Steels

-0.17

Correlation Coefficient

STEEL EXCHANGE  Kalyani Steels

Good diversification

The 3 months correlation between STEEL and Kalyani is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding STEEL EXCHANGE INDIA and Kalyani Steels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kalyani Steels 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 Kalyani Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kalyani Steels has no effect on the direction of STEEL EXCHANGE i.e., STEEL EXCHANGE and Kalyani Steels go up and down completely randomly.

Pair Corralation between STEEL EXCHANGE and Kalyani Steels

Assuming the 90 days trading horizon STEEL EXCHANGE INDIA is expected to under-perform the Kalyani Steels. But the stock apears to be less risky and, when comparing its historical volatility, STEEL EXCHANGE INDIA is 1.6 times less risky than Kalyani Steels. The stock trades about -0.05 of its potential returns per unit of risk. The Kalyani Steels Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  75,810  in Kalyani Steels Limited on October 27, 2024 and sell it today you would earn a total of  17,115  from holding Kalyani Steels Limited or generate 22.58% return on investment over 90 days.

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

STEEL EXCHANGE INDIA  vs.  Kalyani Steels Limited

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.

Kalyani Steels

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kalyani Steels Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Kalyani Steels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STEEL EXCHANGE and Kalyani Steels

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

The idea behind STEEL EXCHANGE INDIA and Kalyani Steels Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.