Correlation Between Centamin PLC and Tata Steel
Can any of the company-specific risk be diversified away by investing in both Centamin PLC 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 Centamin PLC and Tata Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Centamin PLC and Tata Steel Limited, you can compare the effects of market volatilities on Centamin PLC 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 Centamin PLC with a short position of Tata Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centamin PLC and Tata Steel.
Diversification Opportunities for Centamin PLC and Tata Steel
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Centamin and Tata is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Centamin PLC and Tata Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Steel Limited and Centamin PLC 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 Centamin PLC 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 Limited has no effect on the direction of Centamin PLC i.e., Centamin PLC and Tata Steel go up and down completely randomly.
Pair Corralation between Centamin PLC and Tata Steel
Assuming the 90 days trading horizon Centamin PLC is expected to generate 0.82 times more return on investment than Tata Steel. However, Centamin PLC is 1.21 times less risky than Tata Steel. It trades about 0.07 of its potential returns per unit of risk. Tata Steel Limited is currently generating about 0.04 per unit of risk. If you would invest 8,979 in Centamin PLC on September 2, 2024 and sell it today you would earn a total of 5,621 from holding Centamin PLC or generate 62.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Centamin PLC vs. Tata Steel Limited
Performance |
| Timeline |
| Centamin PLC |
| Tata Steel Limited |
Centamin PLC and Tata Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Centamin PLC and Tata Steel
The main advantage of trading using opposite Centamin PLC and Tata Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centamin PLC 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.| Centamin PLC vs. Givaudan SA | Centamin PLC vs. Antofagasta PLC | Centamin PLC vs. Atalaya Mining | Centamin PLC vs. Ferrexpo PLC |
| Tata Steel vs. Givaudan SA | Tata Steel vs. Antofagasta PLC | Tata Steel vs. Atalaya Mining | Tata Steel vs. Ferrexpo PLC |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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