Correlation Between STEEL EXCHANGE and Salzer Electronics

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

Diversification Opportunities for STEEL EXCHANGE and Salzer Electronics

0.88

Correlation Coefficient

STEEL EXCHANGE  Salzer Electronics

Very poor diversification

The 3 months correlation between STEEL and Salzer is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding STEEL EXCHANGE INDIA and Salzer Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salzer Electronics 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 Salzer Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salzer Electronics has no effect on the direction of STEEL EXCHANGE i.e., STEEL EXCHANGE and Salzer Electronics go up and down completely randomly.

Pair Corralation between STEEL EXCHANGE and Salzer Electronics

Assuming the 90 days trading horizon STEEL EXCHANGE INDIA is expected to under-perform the Salzer Electronics. But the stock apears to be less risky and, when comparing its historical volatility, STEEL EXCHANGE INDIA is 1.47 times less risky than Salzer Electronics. The stock trades about -0.13 of its potential returns per unit of risk. The Salzer Electronics Limited is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  138,560  in Salzer Electronics Limited on December 28, 2024 and sell it today you would lose (30,070) from holding Salzer Electronics Limited or give up 21.7% 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.  Salzer Electronics Limited

STEEL EXCHANGE INDIA

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Salzer Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salzer Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with STEEL EXCHANGE and Salzer Electronics

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

The idea behind STEEL EXCHANGE INDIA and Salzer Electronics 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.