Correlation Between Steel Authority and JTL Industries

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

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

Diversification Opportunities for Steel Authority and JTL Industries

0.32

Correlation Coefficient

Steel Authority  JTL Industries

Weak diversification

The 3 months correlation between Steel and JTL is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and JTL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JTL Industries and Steel Authority 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 Steel Authority of are associated (or correlated) with JTL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JTL Industries has no effect on the direction of Steel Authority i.e., Steel Authority and JTL Industries go up and down completely randomly.

Pair Corralation between Steel Authority and JTL Industries

Assuming the 90 days trading horizon Steel Authority is expected to generate 3.78 times less return on investment than JTL Industries. In addition to that, Steel Authority is 1.56 times more volatile than JTL Industries. It trades about 0.0 of its total potential returns per unit of risk. JTL Industries is currently generating about 0.03 per unit of volatility. If you would invest  21,655  in JTL Industries on March 12, 2024 and sell it today you would earn a total of  175.00  from holding JTL Industries or generate 0.81% return on investment over 90 days.

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

Steel Authority of  vs.  JTL Industries

Steel Authority

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Authority of are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Steel Authority unveiled solid returns over the last few months and may actually be approaching a breakup point.

JTL Industries

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JTL Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, JTL Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Authority and JTL Industries

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

The idea behind Steel Authority of and JTL Industries 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.