Correlation Between Steel Authority and CSB Bank

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

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

Diversification Opportunities for Steel Authority and CSB Bank

0.36

Correlation Coefficient

Steel Authority  CSB Bank

Weak diversification

The 3 months correlation between Steel and CSB is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and CSB Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSB Bank Limited and Steel Authority 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 Authority of are associated (or correlated) with CSB Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSB Bank Limited has no effect on the direction of Steel Authority i.e., Steel Authority and CSB Bank go up and down completely randomly.

Pair Corralation between Steel Authority and CSB Bank

Assuming the 90 days trading horizon Steel Authority of is expected to generate 0.81 times more return on investment than CSB Bank. However, Steel Authority of is 1.23 times less risky than CSB Bank. It trades about 0.09 of its potential returns per unit of risk. CSB Bank Limited is currently generating about 0.05 per unit of risk. If you would invest  11,283  in Steel Authority of on September 23, 2024 and sell it today you would earn a total of  327.00  from holding Steel Authority of or generate 2.9% return on investment over 90 days.

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

Steel Authority of  vs.  CSB Bank Limited

Steel Authority

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steel Authority of 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.

CSB Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSB Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, CSB Bank is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Steel Authority and CSB Bank

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

The idea behind Steel Authority of and CSB Bank 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.