Correlation Between General Insurance and JSW Steel

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

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

Diversification Opportunities for General Insurance and JSW Steel

0.13

Correlation Coefficient

General Insurance  JSW Steel

Average diversification

The 3 months correlation between General and JSW is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding General Insurance and JSW Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSW Steel Limited and General Insurance 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 General Insurance are associated (or correlated) with JSW Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSW Steel Limited has no effect on the direction of General Insurance i.e., General Insurance and JSW Steel go up and down completely randomly.

Pair Corralation between General Insurance and JSW Steel

Assuming the 90 days trading horizon General Insurance is expected to generate 1.13 times more return on investment than JSW Steel. However, General Insurance is 1.13 times more volatile than JSW Steel Limited. It trades about 0.25 of its potential returns per unit of risk. JSW Steel Limited is currently generating about 0.12 per unit of risk. If you would invest  36,325  in General Insurance on September 5, 2024 and sell it today you would earn a total of  4,340  from holding General Insurance or generate 11.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

General Insurance  vs.  JSW Steel Limited

General Insurance

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, General Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

JSW Steel Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JSW Steel Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, JSW Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with General Insurance and JSW Steel

The main advantage of trading using opposite General Insurance and JSW Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Insurance position performs unexpectedly, JSW 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 JSW Steel will offset losses from the drop in JSW Steel's long position.

The idea behind General Insurance and JSW Steel 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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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.