Correlation Between Rama Steel and Jindal Steel

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

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

Diversification Opportunities for Rama Steel and Jindal Steel

0.84

Correlation Coefficient

Rama Steel  Jindal Steel

Very poor diversification

The 3 months correlation between Rama and Jindal is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Rama Steel Tubes and Jindal Steel Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jindal Steel Power and Rama 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 Rama Steel Tubes are associated (or correlated) with Jindal Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jindal Steel Power has no effect on the direction of Rama Steel i.e., Rama Steel and Jindal Steel go up and down completely randomly.

Pair Corralation between Rama Steel and Jindal Steel

Assuming the 90 days trading horizon Rama Steel is expected to generate 1.37 times less return on investment than Jindal Steel. In addition to that, Rama Steel is 2.09 times more volatile than Jindal Steel Power. It trades about 0.17 of its total potential returns per unit of risk. Jindal Steel Power is currently generating about 0.48 per unit of volatility. If you would invest  88,675  in Jindal Steel Power on September 17, 2024 and sell it today you would earn a total of  11,200  from holding Jindal Steel Power or generate 12.63% return on investment over 90 days.

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

Rama Steel Tubes  vs.  Jindal Steel Power

Rama Steel Tubes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rama Steel Tubes 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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Jindal Steel Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jindal Steel Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Rama Steel and Jindal Steel

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

The idea behind Rama Steel Tubes and Jindal Steel Power 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.