Correlation Between Rama Steel and Sarthak Metals

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

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

Diversification Opportunities for Rama Steel and Sarthak Metals

0.37

Correlation Coefficient

Rama Steel  Sarthak Metals

Weak diversification

The 3 months correlation between Rama and Sarthak is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Rama Steel Tubes and Sarthak Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarthak Metals and Rama 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 Rama Steel Tubes are associated (or correlated) with Sarthak Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarthak Metals has no effect on the direction of Rama Steel i.e., Rama Steel and Sarthak Metals go up and down completely randomly.

Pair Corralation between Rama Steel and Sarthak Metals

Assuming the 90 days trading horizon Rama Steel Tubes is expected to generate 1.26 times more return on investment than Sarthak Metals. However, Rama Steel is 1.26 times more volatile than Sarthak Metals Limited. It trades about 0.14 of its potential returns per unit of risk. Sarthak Metals Limited is currently generating about 0.14 per unit of risk. If you would invest  1,118  in Rama Steel Tubes on March 23, 2025 and sell it today you would earn a total of  112.00  from holding Rama Steel Tubes or generate 10.02% return on investment over 90 days.

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

Rama Steel Tubes  vs.  Sarthak Metals Limited

Rama Steel Tubes

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rama Steel Tubes are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Rama Steel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sarthak Metals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sarthak Metals Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sarthak Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rama Steel and Sarthak Metals

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

The idea behind Rama Steel Tubes and Sarthak Metals Limited 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.