Correlation Between SAL Steel and Global Education

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

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

Diversification Opportunities for SAL Steel and Global Education

-0.23

Correlation Coefficient

SAL Steel  Global Education

Very good diversification

The 3 months correlation between SAL and Global is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding SAL Steel Limited and Global Education Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Education and SAL Steel 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 SAL Steel Limited are associated (or correlated) with Global Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Education has no effect on the direction of SAL Steel i.e., SAL Steel and Global Education go up and down completely randomly.

Pair Corralation between SAL Steel and Global Education

Assuming the 90 days trading horizon SAL Steel Limited is expected to generate 1.14 times more return on investment than Global Education. However, SAL Steel is 1.14 times more volatile than Global Education Limited. It trades about 0.04 of its potential returns per unit of risk. Global Education Limited is currently generating about 0.0 per unit of risk. If you would invest  2,292  in SAL Steel Limited on September 4, 2024 and sell it today you would earn a total of  95.00  from holding SAL Steel Limited or generate 4.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SAL Steel Limited  vs.  Global Education Limited

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.

Global Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Education Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Global Education is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SAL Steel and Global Education

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

The idea behind SAL Steel Limited and Global Education 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.