Correlation Between Steel Authority and Rajnandini Metal

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

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

Diversification Opportunities for Steel Authority and Rajnandini Metal

0.22

Correlation Coefficient

Steel Authority  Rajnandini Metal

Modest diversification

The 3 months correlation between Steel and Rajnandini is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and Rajnandini Metal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rajnandini Metal and Steel Authority 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 Authority of are associated (or correlated) with Rajnandini Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rajnandini Metal has no effect on the direction of Steel Authority i.e., Steel Authority and Rajnandini Metal go up and down completely randomly.

Pair Corralation between Steel Authority and Rajnandini Metal

Assuming the 90 days trading horizon Steel Authority of is expected to generate 0.8 times more return on investment than Rajnandini Metal. However, Steel Authority of is 1.25 times less risky than Rajnandini Metal. It trades about 0.14 of its potential returns per unit of risk. Rajnandini Metal Limited is currently generating about -0.03 per unit of risk. If you would invest  11,481  in Steel Authority of on April 25, 2025 and sell it today you would earn a total of  1,998  from holding Steel Authority of or generate 17.4% return on investment over 90 days.

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

Steel Authority of  vs.  Rajnandini Metal Limited

Steel Authority

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Authority of are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Steel Authority unveiled solid returns over the last few months and may actually be approaching a breakup point.

Rajnandini Metal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rajnandini Metal Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Rajnandini Metal is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Steel Authority and Rajnandini Metal

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

The idea behind Steel Authority of and Rajnandini Metal 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.