Correlation Between SAL Steel and Zydus Wellness

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

Diversification Opportunities for SAL Steel and Zydus Wellness

SALZydusDiversified AwaySALZydusDiversified Away100%
0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between SAL and Zydus is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding SAL Steel Limited and Zydus Wellness Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zydus Wellness 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 Zydus Wellness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zydus Wellness has no effect on the direction of SAL Steel i.e., SAL Steel and Zydus Wellness go up and down completely randomly.

Pair Corralation between SAL Steel and Zydus Wellness

Assuming the 90 days trading horizon SAL Steel Limited is expected to generate 2.09 times more return on investment than Zydus Wellness. However, SAL Steel is 2.09 times more volatile than Zydus Wellness Limited. It trades about 0.03 of its potential returns per unit of risk. Zydus Wellness Limited is currently generating about 0.02 per unit of risk. If you would invest  1,430  in SAL Steel Limited on December 12, 2024 and sell it today you would earn a total of  449.00  from holding SAL Steel Limited or generate 31.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.79%
ValuesDaily Returns

SAL Steel Limited  vs.  Zydus Wellness Limited

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -35-30-25-20-15-10-50
JavaScript chart by amCharts 3.21.15SALSTEEL ZYDUSWELL
       Timeline  
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 inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
JavaScript chart by amCharts 3.21.15JanFebMarFebMar161820222426
Zydus Wellness 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Zydus Wellness Limited 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
JavaScript chart by amCharts 3.21.15JanFebMarFebMar1,5001,6001,7001,8001,9002,000

SAL Steel and Zydus Wellness Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.38-5.53-3.68-1.82-0.03091.63.294.976.668.34 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15SALSTEEL ZYDUSWELL
       Returns  

Pair Trading with SAL Steel and Zydus Wellness

The main advantage of trading using opposite SAL Steel and Zydus Wellness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SAL Steel position performs unexpectedly, Zydus Wellness 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 Zydus Wellness will offset losses from the drop in Zydus Wellness' long position.
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The idea behind SAL Steel Limited and Zydus Wellness 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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