Correlation Between Asian Sea and Tata Steel
Can any of the company-specific risk be diversified away by investing in both Asian Sea and Tata 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 Asian Sea and Tata Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asian Sea and Tata Steel Public, you can compare the effects of market volatilities on Asian Sea and Tata 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 Asian Sea with a short position of Tata Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asian Sea and Tata Steel.
Diversification Opportunities for Asian Sea and Tata Steel
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Asian and Tata is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Asian Sea and Tata Steel Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Steel Public and Asian Sea 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 Asian Sea are associated (or correlated) with Tata Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Steel Public has no effect on the direction of Asian Sea i.e., Asian Sea and Tata Steel go up and down completely randomly.
Pair Corralation between Asian Sea and Tata Steel
Assuming the 90 days trading horizon Asian Sea is expected to under-perform the Tata Steel. But the stock apears to be less risky and, when comparing its historical volatility, Asian Sea is 61.86 times less risky than Tata Steel. The stock trades about -0.05 of its potential returns per unit of risk. The Tata Steel Public is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 65.00 in Tata Steel Public on August 28, 2024 and sell it today you would earn a total of 5.00 from holding Tata Steel Public or generate 7.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Asian Sea vs. Tata Steel Public
Performance |
| Timeline |
| Asian Sea |
| Tata Steel Public |
Asian Sea and Tata Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Asian Sea and Tata Steel
The main advantage of trading using opposite Asian Sea and Tata Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asian Sea position performs unexpectedly, Tata 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 Tata Steel will offset losses from the drop in Tata Steel's long position.The idea behind Asian Sea and Tata Steel Public 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.| Tata Steel vs. PTT Public | Tata Steel vs. PTT Exploration and | Tata Steel vs. CP ALL Public | Tata Steel vs. Kasikornbank Public |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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