Correlation Between SAL Steel and N B

Can any of the company-specific risk be diversified away by investing in both SAL Steel and N B 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 N B 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 N B I, you can compare the effects of market volatilities on SAL Steel and N B 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 N B. Check out your portfolio center. Please also check ongoing floating volatility patterns of SAL Steel and N B.

Diversification Opportunities for SAL Steel and N B

-0.38

Correlation Coefficient

SAL Steel  N B

Very good diversification

The 3 months correlation between SAL and NBIFIN is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding SAL Steel Limited and N B I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on N B I 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 N B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of N B I has no effect on the direction of SAL Steel i.e., SAL Steel and N B go up and down completely randomly.

Pair Corralation between SAL Steel and N B

Assuming the 90 days trading horizon SAL Steel Limited is expected to under-perform the N B. In addition to that, SAL Steel is 1.12 times more volatile than N B I. It trades about -0.01 of its total potential returns per unit of risk. N B I is currently generating about 0.23 per unit of volatility. If you would invest  233,100  in N B I on September 12, 2024 and sell it today you would earn a total of  113,215  from holding N B I or generate 48.57% 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.  N B I

SAL Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAL Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SAL Steel is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

N B I

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in N B I are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, N B sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SAL Steel and N B

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

The idea behind SAL Steel Limited and N B I 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.