Correlation Between Visa Steel and SAL Steel

Can any of the company-specific risk be diversified away by investing in both Visa Steel 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 Visa Steel and SAL Steel 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 SAL Steel Limited, you can compare the effects of market volatilities on Visa Steel 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 Visa Steel with a short position of SAL Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa Steel and SAL Steel.

Diversification Opportunities for Visa Steel and SAL Steel

-0.3

Correlation Coefficient

Visa Steel  SAL Steel

Very good diversification

The 3 months correlation between Visa and SAL is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Visa Steel Limited 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 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 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 Visa Steel i.e., Visa Steel and SAL Steel go up and down completely randomly.

Pair Corralation between Visa Steel and SAL Steel

Assuming the 90 days trading horizon Visa Steel Limited is expected to generate 1.21 times more return on investment than SAL Steel. However, Visa Steel is 1.21 times more volatile than SAL Steel Limited. It trades about 0.13 of its potential returns per unit of risk. SAL Steel Limited is currently generating about -0.1 per unit of risk. If you would invest  3,444  in Visa Steel Limited on October 9, 2024 and sell it today you would earn a total of  888.00  from holding Visa Steel Limited or generate 25.78% 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.  SAL Steel Limited

Visa Steel Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Steel Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Visa Steel exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Visa Steel and SAL Steel

The main advantage of trading using opposite Visa Steel and SAL Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa Steel 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 Visa Steel Limited 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.