Correlation Between Usha Martin and Electrosteel Castings

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

By analyzing existing cross correlation between Usha Martin Education and Electrosteel Castings Limited, you can compare the effects of market volatilities on Usha Martin and Electrosteel Castings 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 Usha Martin with a short position of Electrosteel Castings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Usha Martin and Electrosteel Castings.

Diversification Opportunities for Usha Martin and Electrosteel Castings

-0.24

Correlation Coefficient

Usha Martin  Electrosteel Castings

Very good diversification

The 3 months correlation between Usha and Electrosteel is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Usha Martin Education and Electrosteel Castings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electrosteel Castings and Usha Martin 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 Usha Martin Education are associated (or correlated) with Electrosteel Castings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electrosteel Castings has no effect on the direction of Usha Martin i.e., Usha Martin and Electrosteel Castings go up and down completely randomly.

Pair Corralation between Usha Martin and Electrosteel Castings

Assuming the 90 days trading horizon Usha Martin Education is expected to generate 1.32 times more return on investment than Electrosteel Castings. However, Usha Martin is 1.32 times more volatile than Electrosteel Castings Limited. It trades about -0.21 of its potential returns per unit of risk. Electrosteel Castings Limited is currently generating about -0.29 per unit of risk. If you would invest  766.00  in Usha Martin Education on October 6, 2024 and sell it today you would lose (99.00) from holding Usha Martin Education or give up 12.92% of portfolio value over 90 days.

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

Usha Martin Education  vs.  Electrosteel Castings Limited

Usha Martin Education

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Usha Martin Education are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Usha Martin is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Electrosteel Castings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electrosteel Castings Limited 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 basic 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.

Pair Trading with Usha Martin and Electrosteel Castings

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

The idea behind Usha Martin Education and Electrosteel Castings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.