Correlation Between STEEL EXCHANGE and Bombay Burmah

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

Diversification Opportunities for STEEL EXCHANGE and Bombay Burmah

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between STEEL and Bombay is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding STEEL EXCHANGE INDIA and Bombay Burmah Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bombay Burmah Trading and STEEL EXCHANGE 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 STEEL EXCHANGE INDIA are associated (or correlated) with Bombay Burmah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bombay Burmah Trading has no effect on the direction of STEEL EXCHANGE i.e., STEEL EXCHANGE and Bombay Burmah go up and down completely randomly.

Pair Corralation between STEEL EXCHANGE and Bombay Burmah

Assuming the 90 days trading horizon STEEL EXCHANGE INDIA is expected to generate 0.84 times more return on investment than Bombay Burmah. However, STEEL EXCHANGE INDIA is 1.19 times less risky than Bombay Burmah. It trades about 0.04 of its potential returns per unit of risk. Bombay Burmah Trading is currently generating about 0.0 per unit of risk. If you would invest  1,026  in STEEL EXCHANGE INDIA on October 29, 2024 and sell it today you would earn a total of  17.00  from holding STEEL EXCHANGE INDIA or generate 1.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

STEEL EXCHANGE INDIA  vs.  Bombay Burmah Trading

 Performance 
       Timeline  
STEEL EXCHANGE INDIA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days STEEL EXCHANGE INDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, STEEL EXCHANGE is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.
Bombay Burmah Trading 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Bombay Burmah Trading 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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

STEEL EXCHANGE and Bombay Burmah Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with STEEL EXCHANGE and Bombay Burmah

The main advantage of trading using opposite STEEL EXCHANGE and Bombay Burmah positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEEL EXCHANGE position performs unexpectedly, Bombay Burmah 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 Bombay Burmah will offset losses from the drop in Bombay Burmah's long position.
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The idea behind STEEL EXCHANGE INDIA and Bombay Burmah Trading 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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