Correlation Between Steel Authority and Rama Steel

Can any of the company-specific risk be diversified away by investing in both Steel Authority and Rama Steel 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 Rama Steel 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 Rama Steel Tubes, you can compare the effects of market volatilities on Steel Authority and Rama Steel 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 Rama Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Authority and Rama Steel.

Diversification Opportunities for Steel Authority and Rama Steel

0.89

Correlation Coefficient

Steel Authority  Rama Steel

Very poor diversification

The 3 months correlation between Steel and Rama is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and Rama Steel Tubes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rama Steel Tubes 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 Rama Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rama Steel Tubes has no effect on the direction of Steel Authority i.e., Steel Authority and Rama Steel go up and down completely randomly.

Pair Corralation between Steel Authority and Rama Steel

Assuming the 90 days trading horizon Steel Authority is expected to generate 2.04 times less return on investment than Rama Steel. But when comparing it to its historical volatility, Steel Authority of is 1.45 times less risky than Rama Steel. It trades about 0.07 of its potential returns per unit of risk. Rama Steel Tubes is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,025  in Rama Steel Tubes on March 21, 2025 and sell it today you would earn a total of  187.00  from holding Rama Steel Tubes or generate 18.24% return on investment over 90 days.

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

Steel Authority of  vs.  Rama Steel Tubes

Steel Authority

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Authority of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Steel Authority may actually be approaching a critical reversion point that can send shares even higher in July 2025.

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 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Rama Steel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Authority and Rama Steel

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

The idea behind Steel Authority of and Rama Steel Tubes 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..