Correlation Between STEEL EXCHANGE and Embassy Office

Can any of the company-specific risk be diversified away by investing in both STEEL EXCHANGE and Embassy Office 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 EXCHANGE and Embassy Office into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between STEEL EXCHANGE INDIA and Embassy Office Parks, you can compare the effects of market volatilities on STEEL EXCHANGE and Embassy Office 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 EXCHANGE with a short position of Embassy Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of STEEL EXCHANGE and Embassy Office.

Diversification Opportunities for STEEL EXCHANGE and Embassy Office

0.52

Correlation Coefficient

STEEL EXCHANGE  Embassy Office

Very weak diversification

The 3 months correlation between STEEL and Embassy is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding STEEL EXCHANGE INDIA and Embassy Office Parks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embassy Office Parks and STEEL EXCHANGE 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 EXCHANGE INDIA are associated (or correlated) with Embassy Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embassy Office Parks has no effect on the direction of STEEL EXCHANGE i.e., STEEL EXCHANGE and Embassy Office go up and down completely randomly.

Pair Corralation between STEEL EXCHANGE and Embassy Office

Assuming the 90 days trading horizon STEEL EXCHANGE INDIA is expected to under-perform the Embassy Office. In addition to that, STEEL EXCHANGE is 1.79 times more volatile than Embassy Office Parks. It trades about -0.11 of its total potential returns per unit of risk. Embassy Office Parks is currently generating about 0.02 per unit of volatility. If you would invest  35,025  in Embassy Office Parks on September 21, 2024 and sell it today you would earn a total of  586.00  from holding Embassy Office Parks or generate 1.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

STEEL EXCHANGE INDIA  vs.  Embassy Office Parks

STEEL EXCHANGE INDIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STEEL EXCHANGE INDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Embassy Office Parks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embassy Office Parks 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 strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with STEEL EXCHANGE and Embassy Office

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

The idea behind STEEL EXCHANGE INDIA and Embassy Office Parks 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.