Correlation Between SAL Steel and MSP Steel
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By analyzing existing cross correlation between SAL Steel Limited and MSP Steel Power, you can compare the effects of market volatilities on SAL Steel and MSP 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 SAL Steel with a short position of MSP Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of SAL Steel and MSP Steel.
Diversification Opportunities for SAL Steel and MSP Steel
Poor diversification
The 3 months correlation between SAL and MSP is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding SAL Steel Limited and MSP Steel Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSP Steel Power and SAL 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 SAL Steel Limited are associated (or correlated) with MSP Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSP Steel Power has no effect on the direction of SAL Steel i.e., SAL Steel and MSP Steel go up and down completely randomly.
Pair Corralation between SAL Steel and MSP Steel
Assuming the 90 days trading horizon SAL Steel Limited is expected to under-perform the MSP Steel. But the stock apears to be less risky and, when comparing its historical volatility, SAL Steel Limited is 1.21 times less risky than MSP Steel. The stock trades about -0.02 of its potential returns per unit of risk. The MSP Steel Power is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,187 in MSP Steel Power on August 29, 2024 and sell it today you would earn a total of 133.00 from holding MSP Steel Power or generate 3.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAL Steel Limited vs. MSP Steel Power
Performance |
| Timeline |
| SAL Steel Limited |
| MSP Steel Power |
SAL Steel and MSP Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SAL Steel and MSP Steel
The main advantage of trading using opposite SAL Steel and MSP Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SAL Steel position performs unexpectedly, MSP 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 MSP Steel will offset losses from the drop in MSP Steel's long position.The idea behind SAL Steel Limited and MSP 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.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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