Correlation Between JTL Industries and SAL Steel

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

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

Diversification Opportunities for JTL Industries and SAL Steel

0.34

Correlation Coefficient

JTL Industries  SAL Steel

Weak diversification

The 3 months correlation between JTL and SAL is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding JTL Industries and SAL Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAL Steel Limited and JTL Industries 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 JTL Industries are associated (or correlated) with SAL Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAL Steel Limited has no effect on the direction of JTL Industries i.e., JTL Industries and SAL Steel go up and down completely randomly.

Pair Corralation between JTL Industries and SAL Steel

Assuming the 90 days trading horizon JTL Industries is expected to under-perform the SAL Steel. In addition to that, JTL Industries is 2.85 times more volatile than SAL Steel Limited. It trades about -0.17 of its total potential returns per unit of risk. SAL Steel Limited is currently generating about -0.12 per unit of volatility. If you would invest  2,832  in SAL Steel Limited on September 4, 2024 and sell it today you would lose (445.00) from holding SAL Steel Limited or give up 15.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

JTL Industries  vs.  SAL Steel Limited

JTL Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JTL Industries 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 somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SAL Steel Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SAL Steel Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, SAL Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with JTL Industries and SAL Steel

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

The idea behind JTL Industries and SAL 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.