Correlation Between California Software and Jindal Steel

Can any of the company-specific risk be diversified away by investing in both California Software 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 California Software and Jindal Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between California Software and Jindal Steel Power, you can compare the effects of market volatilities on California Software 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 California Software with a short position of Jindal Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Software and Jindal Steel.

Diversification Opportunities for California Software and Jindal Steel

0.71

Correlation Coefficient

California Software  Jindal Steel

Poor diversification

The 3 months correlation between California and Jindal is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding California Software 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 California Software 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 California Software 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 California Software i.e., California Software and Jindal Steel go up and down completely randomly.

Pair Corralation between California Software and Jindal Steel

Assuming the 90 days trading horizon California Software is expected to under-perform the Jindal Steel. In addition to that, California Software is 1.47 times more volatile than Jindal Steel Power. It trades about -0.18 of its total potential returns per unit of risk. Jindal Steel Power is currently generating about -0.06 per unit of volatility. If you would invest  105,350  in Jindal Steel Power on September 17, 2024 and sell it today you would lose (7,740) from holding Jindal Steel Power or give up 7.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

California Software  vs.  Jindal Steel Power

California Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days California Software 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Jindal Steel Power

Risk-Adjusted Performance

0 of 100

Very Weak

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 latest uncertain 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.

Pair Trading with California Software and Jindal Steel

The main advantage of trading using opposite California Software and Jindal Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Software 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.

The idea behind California Software 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.