Correlation Between Visa Steel and Fertilizers

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

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

Diversification Opportunities for Visa Steel and Fertilizers

-0.16

Correlation Coefficient

Visa Steel  Fertilizers

Good diversification

The 3 months correlation between Visa and Fertilizers is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Visa Steel Limited and Fertilizers and Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fertilizers and Chemicals and Visa Steel 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 Visa Steel Limited are associated (or correlated) with Fertilizers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fertilizers and Chemicals has no effect on the direction of Visa Steel i.e., Visa Steel and Fertilizers go up and down completely randomly.

Pair Corralation between Visa Steel and Fertilizers

Assuming the 90 days trading horizon Visa Steel is expected to generate 1.16 times less return on investment than Fertilizers. But when comparing it to its historical volatility, Visa Steel Limited is 1.43 times less risky than Fertilizers. It trades about 0.1 of its potential returns per unit of risk. Fertilizers and Chemicals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  21,901  in Fertilizers and Chemicals on December 2, 2024 and sell it today you would earn a total of  47,269  from holding Fertilizers and Chemicals or generate 215.83% return on investment over 90 days.

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

Visa Steel Limited  vs.  Fertilizers and Chemicals

Visa Steel Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Steel Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Visa Steel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Fertilizers and Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fertilizers and Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Visa Steel and Fertilizers

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

The idea behind Visa Steel Limited and Fertilizers and Chemicals 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.