Correlation Between Tube Investments and SAL Steel

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

By analyzing existing cross correlation between Tube Investments of and SAL Steel Limited, you can compare the effects of market volatilities on Tube Investments and SAL Steel 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 Tube Investments with a short position of SAL Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tube Investments and SAL Steel.

Diversification Opportunities for Tube Investments and SAL Steel

0.58

Correlation Coefficient

Tube Investments  SAL Steel

Very weak diversification

The 3 months correlation between Tube and SAL is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Tube Investments of and SAL Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAL Steel Limited and Tube Investments 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 Tube Investments of are associated (or correlated) with SAL Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAL Steel Limited has no effect on the direction of Tube Investments i.e., Tube Investments and SAL Steel go up and down completely randomly.

Pair Corralation between Tube Investments and SAL Steel

Assuming the 90 days trading horizon Tube Investments is expected to generate 1.28 times less return on investment than SAL Steel. But when comparing it to its historical volatility, Tube Investments of is 1.32 times less risky than SAL Steel. It trades about 0.03 of its potential returns per unit of risk. SAL Steel Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,770  in SAL Steel Limited on October 27, 2024 and sell it today you would earn a total of  364.00  from holding SAL Steel Limited or generate 20.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Tube Investments of  vs.  SAL Steel Limited

Tube Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tube Investments of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SAL Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAL Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental 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 Tube Investments and SAL Steel

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

The idea behind Tube Investments of and SAL Steel 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.