Correlation Between SAL Steel and Orissa Minerals

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

Diversification Opportunities for SAL Steel and Orissa Minerals

0.67

Correlation Coefficient

SAL Steel  Orissa Minerals

Poor diversification

The 3 months correlation between SAL and Orissa is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding SAL Steel Limited and The Orissa Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orissa Minerals 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 Orissa Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orissa Minerals has no effect on the direction of SAL Steel i.e., SAL Steel and Orissa Minerals go up and down completely randomly.

Pair Corralation between SAL Steel and Orissa Minerals

Assuming the 90 days trading horizon SAL Steel Limited is expected to generate 1.48 times more return on investment than Orissa Minerals. However, SAL Steel is 1.48 times more volatile than The Orissa Minerals. It trades about -0.03 of its potential returns per unit of risk. The Orissa Minerals is currently generating about -0.08 per unit of risk. If you would invest  2,765  in SAL Steel Limited on September 15, 2024 and sell it today you would lose (255.00) from holding SAL Steel Limited or give up 9.22% of portfolio value over 90 days.

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

SAL Steel Limited  vs.  The Orissa Minerals

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 latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Orissa Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Orissa Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with SAL Steel and Orissa Minerals

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

The idea behind SAL Steel Limited and The Orissa Minerals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.