Correlation Between Zenith Steel and General Insurance

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Can any of the company-specific risk be diversified away by investing in both Zenith Steel and General Insurance 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 Zenith Steel and General Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zenith Steel Pipes and General Insurance, you can compare the effects of market volatilities on Zenith Steel and General Insurance 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 Zenith Steel with a short position of General Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zenith Steel and General Insurance.

Diversification Opportunities for Zenith Steel and General Insurance

0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between Zenith and General is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Zenith Steel Pipes and General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Insurance and Zenith 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 Zenith Steel Pipes are associated (or correlated) with General Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Insurance has no effect on the direction of Zenith Steel i.e., Zenith Steel and General Insurance go up and down completely randomly.

Pair Corralation between Zenith Steel and General Insurance

Assuming the 90 days trading horizon Zenith Steel Pipes is expected to under-perform the General Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Zenith Steel Pipes is 1.06 times less risky than General Insurance. The stock trades about -0.16 of its potential returns per unit of risk. The General Insurance is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  39,290  in General Insurance on September 12, 2024 and sell it today you would earn a total of  3,305  from holding General Insurance or generate 8.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Zenith Steel Pipes  vs.  General Insurance

 Performance 
       Timeline  
Zenith Steel Pipes 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Zenith Steel Pipes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
General Insurance 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, General Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Zenith Steel and General Insurance Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Zenith Steel and General Insurance

The main advantage of trading using opposite Zenith Steel and General Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zenith Steel position performs unexpectedly, General Insurance 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 General Insurance will offset losses from the drop in General Insurance's long position.
The idea behind Zenith Steel Pipes and General Insurance 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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