Correlation Between JSW Steel and Elecon Engineering

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

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

Diversification Opportunities for JSW Steel and Elecon Engineering

0.17

Correlation Coefficient

JSW Steel  Elecon Engineering

Average diversification

The 3 months correlation between JSW and Elecon is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited and Elecon Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elecon Engineering and JSW 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 JSW Steel Limited are associated (or correlated) with Elecon Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elecon Engineering has no effect on the direction of JSW Steel i.e., JSW Steel and Elecon Engineering go up and down completely randomly.

Pair Corralation between JSW Steel and Elecon Engineering

Assuming the 90 days trading horizon JSW Steel is expected to generate 38.27 times less return on investment than Elecon Engineering. But when comparing it to its historical volatility, JSW Steel Limited is 2.3 times less risky than Elecon Engineering. It trades about 0.01 of its potential returns per unit of risk. Elecon Engineering is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  40,097  in Elecon Engineering on April 20, 2025 and sell it today you would earn a total of  20,003  from holding Elecon Engineering or generate 49.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

JSW Steel Limited  vs.  Elecon Engineering

JSW Steel Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days JSW 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, JSW Steel is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Elecon Engineering

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elecon Engineering are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Elecon Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JSW Steel and Elecon Engineering

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

The idea behind JSW Steel Limited and Elecon Engineering 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 Stocks Directory module to find actively traded stocks across global markets.