Correlation Between Wah Nobel and Amreli Steels

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

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

Diversification Opportunities for Wah Nobel and Amreli Steels

0.62

Correlation Coefficient

Wah Nobel  Amreli Steels

Poor diversification

The 3 months correlation between Wah and Amreli is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Wah Nobel Chemicals and Amreli Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amreli Steels and Wah Nobel 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 Wah Nobel Chemicals are associated (or correlated) with Amreli Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amreli Steels has no effect on the direction of Wah Nobel i.e., Wah Nobel and Amreli Steels go up and down completely randomly.

Pair Corralation between Wah Nobel and Amreli Steels

Assuming the 90 days trading horizon Wah Nobel Chemicals is expected to under-perform the Amreli Steels. In addition to that, Wah Nobel is 1.42 times more volatile than Amreli Steels. It trades about -0.39 of its total potential returns per unit of risk. Amreli Steels is currently generating about -0.04 per unit of volatility. If you would invest  2,607  in Amreli Steels on October 23, 2024 and sell it today you would lose (51.00) from holding Amreli Steels or give up 1.96% of portfolio value over 90 days.

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

Wah Nobel Chemicals  vs.  Amreli Steels

Wah Nobel Chemicals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Nobel Chemicals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wah Nobel sustained solid returns over the last few months and may actually be approaching a breakup point.

Amreli Steels

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amreli Steels are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amreli Steels sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wah Nobel and Amreli Steels

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

The idea behind Wah Nobel Chemicals and Amreli Steels 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.