Correlation Between STEEL EXCHANGE and JBM Auto

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Can any of the company-specific risk be diversified away by investing in both STEEL EXCHANGE and JBM Auto 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 JBM Auto 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 JBM Auto Limited, you can compare the effects of market volatilities on STEEL EXCHANGE and JBM Auto 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 JBM Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of STEEL EXCHANGE and JBM Auto.

Diversification Opportunities for STEEL EXCHANGE and JBM Auto

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between STEEL and JBM is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding STEEL EXCHANGE INDIA and JBM Auto Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBM Auto Limited 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 JBM Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBM Auto Limited has no effect on the direction of STEEL EXCHANGE i.e., STEEL EXCHANGE and JBM Auto go up and down completely randomly.

Pair Corralation between STEEL EXCHANGE and JBM Auto

Assuming the 90 days trading horizon STEEL EXCHANGE is expected to generate 5.38 times less return on investment than JBM Auto. But when comparing it to its historical volatility, STEEL EXCHANGE INDIA is 1.76 times less risky than JBM Auto. It trades about 0.09 of its potential returns per unit of risk. JBM Auto Limited is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  154,600  in JBM Auto Limited on September 12, 2024 and sell it today you would earn a total of  22,395  from holding JBM Auto Limited or generate 14.49% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy95.45%
ValuesDaily Returns

STEEL EXCHANGE INDIA  vs.  JBM Auto Limited

 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 uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.
JBM Auto Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days JBM Auto Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

STEEL EXCHANGE and JBM Auto Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with STEEL EXCHANGE and JBM Auto

The main advantage of trading using opposite STEEL EXCHANGE and JBM Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEEL EXCHANGE position performs unexpectedly, JBM Auto 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 JBM Auto will offset losses from the drop in JBM Auto's long position.
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The idea behind STEEL EXCHANGE INDIA and JBM Auto 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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