Correlation Between Visa Steel and SBI Cards

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

Diversification Opportunities for Visa Steel and SBI Cards

0.5

Correlation Coefficient

Visa Steel  SBI Cards

Very weak diversification

The 3 months correlation between Visa and SBI is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Visa Steel Limited and SBI Cards and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Cards 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 SBI Cards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Cards has no effect on the direction of Visa Steel i.e., Visa Steel and SBI Cards go up and down completely randomly.

Pair Corralation between Visa Steel and SBI Cards

Assuming the 90 days trading horizon Visa Steel Limited is expected to generate 1.9 times more return on investment than SBI Cards. However, Visa Steel is 1.9 times more volatile than SBI Cards and. It trades about 0.36 of its potential returns per unit of risk. SBI Cards and is currently generating about 0.25 per unit of risk. If you would invest  3,236  in Visa Steel Limited on October 23, 2024 and sell it today you would earn a total of  868.00  from holding Visa Steel Limited or generate 26.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Visa Steel Limited  vs.  SBI Cards and

Visa Steel Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Steel Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Visa Steel exhibited solid returns over the last few months and may actually be approaching a breakup point.

SBI Cards

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Cards and are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, SBI Cards may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Visa Steel and SBI Cards

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

The idea behind Visa Steel Limited and SBI Cards and 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.