Correlation Between Electronics Mart and SAL Steel

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Can any of the company-specific risk be diversified away by investing in both Electronics Mart and SAL 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 Electronics Mart and SAL Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronics Mart India and SAL Steel Limited, you can compare the effects of market volatilities on Electronics Mart and SAL 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 Electronics Mart with a short position of SAL Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronics Mart and SAL Steel.

Diversification Opportunities for Electronics Mart and SAL Steel

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Electronics and SAL is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Electronics Mart India and SAL Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAL Steel Limited and Electronics Mart 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 Electronics Mart India are associated (or correlated) with SAL Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAL Steel Limited has no effect on the direction of Electronics Mart i.e., Electronics Mart and SAL Steel go up and down completely randomly.

Pair Corralation between Electronics Mart and SAL Steel

Assuming the 90 days trading horizon Electronics Mart India is expected to generate 0.64 times more return on investment than SAL Steel. However, Electronics Mart India is 1.55 times less risky than SAL Steel. It trades about -0.04 of its potential returns per unit of risk. SAL Steel Limited is currently generating about -0.09 per unit of risk. If you would invest  16,122  in Electronics Mart India on November 9, 2024 and sell it today you would lose (436.00) from holding Electronics Mart India or give up 2.7% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Electronics Mart India  vs.  SAL Steel Limited

 Performance 
       Timeline  
Electronics Mart India 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Electronics Mart India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
SAL Steel Limited 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days SAL Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Electronics Mart and SAL Steel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Electronics Mart and SAL Steel

The main advantage of trading using opposite Electronics Mart and SAL Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronics Mart position performs unexpectedly, SAL 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 SAL Steel will offset losses from the drop in SAL Steel's long position.
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The idea behind Electronics Mart India and SAL 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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Check out your portfolio center.
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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