Correlation Between MSP Steel and Jindal Steel

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Can any of the company-specific risk be diversified away by investing in both MSP 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 MSP 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 MSP Steel Power and Jindal Steel Power, you can compare the effects of market volatilities on MSP 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 MSP Steel with a short position of Jindal Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSP Steel and Jindal Steel.

Diversification Opportunities for MSP Steel and Jindal Steel

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between MSP and Jindal is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding MSP Steel Power 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 MSP 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 MSP Steel Power 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 MSP Steel i.e., MSP Steel and Jindal Steel go up and down completely randomly.

Pair Corralation between MSP Steel and Jindal Steel

Assuming the 90 days trading horizon MSP Steel Power is expected to under-perform the Jindal Steel. In addition to that, MSP Steel is 1.66 times more volatile than Jindal Steel Power. It trades about -0.36 of its total potential returns per unit of risk. Jindal Steel Power is currently generating about 0.05 per unit of volatility. If you would invest  84,265  in Jindal Steel Power on November 28, 2024 and sell it today you would earn a total of  1,415  from holding Jindal Steel Power or generate 1.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

MSP Steel Power  vs.  Jindal Steel Power

 Performance 
       Timeline  
MSP Steel Power 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days MSP Steel Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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.
Jindal Steel Power 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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 comparatively stable basic indicators, Jindal Steel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

MSP Steel and Jindal Steel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MSP Steel and Jindal Steel

The main advantage of trading using opposite MSP Steel and Jindal Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSP 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.
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The idea behind MSP Steel Power 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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