Correlation Between Hindustan Copper and JSW Steel

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

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

Diversification Opportunities for Hindustan Copper and JSW Steel

0.64

Correlation Coefficient

Hindustan Copper  JSW Steel

Poor diversification

The 3 months correlation between Hindustan and JSW is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Copper Limited and JSW Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSW Steel Limited and Hindustan Copper 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 Hindustan Copper Limited are associated (or correlated) with JSW Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSW Steel Limited has no effect on the direction of Hindustan Copper i.e., Hindustan Copper and JSW Steel go up and down completely randomly.

Pair Corralation between Hindustan Copper and JSW Steel

Assuming the 90 days trading horizon Hindustan Copper Limited is expected to generate 0.89 times more return on investment than JSW Steel. However, Hindustan Copper Limited is 1.12 times less risky than JSW Steel. It trades about -0.1 of its potential returns per unit of risk. JSW Steel Limited is currently generating about -0.11 per unit of risk. If you would invest  27,880  in Hindustan Copper Limited on September 25, 2024 and sell it today you would lose (775.00) from holding Hindustan Copper Limited or give up 2.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Hindustan Copper Limited  vs.  JSW Steel Limited

Hindustan Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindustan Copper Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

JSW Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JSW Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, JSW Steel is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Hindustan Copper and JSW Steel

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

The idea behind Hindustan Copper Limited and JSW 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.