Correlation Between Visa and Jindal Steel

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

Diversification Opportunities for Visa and Jindal Steel

-0.79
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Visa and Jindal is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A 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 Visa 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 Visa Class A 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 Visa i.e., Visa and Jindal Steel go up and down completely randomly.

Pair Corralation between Visa and Jindal Steel

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.6 times more return on investment than Jindal Steel. However, Visa Class A is 1.65 times less risky than Jindal Steel. It trades about 0.13 of its potential returns per unit of risk. Jindal Steel Power is currently generating about -0.05 per unit of risk. If you would invest  26,887  in Visa Class A on November 28, 2024 and sell it today you would earn a total of  8,322  from holding Visa Class A or generate 30.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy98.92%
ValuesDaily Returns

Visa Class A  vs.  Jindal Steel Power

 Performance 
       Timeline  
Visa Class A 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in March 2025.
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.

Visa and Jindal Steel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and Jindal Steel

The main advantage of trading using opposite Visa and Jindal Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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