Correlation Between Steel Authority and Tamilnad Mercantile
Can any of the company-specific risk be diversified away by investing in both Steel Authority and Tamilnad Mercantile 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 Tamilnad Mercantile 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 Tamilnad Mercantile Bank, you can compare the effects of market volatilities on Steel Authority and Tamilnad Mercantile 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 Tamilnad Mercantile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Authority and Tamilnad Mercantile.
Diversification Opportunities for Steel Authority and Tamilnad Mercantile
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Tamilnad is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and Tamilnad Mercantile Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tamilnad Mercantile Bank 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 Tamilnad Mercantile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tamilnad Mercantile Bank has no effect on the direction of Steel Authority i.e., Steel Authority and Tamilnad Mercantile go up and down completely randomly.
Pair Corralation between Steel Authority and Tamilnad Mercantile
Assuming the 90 days trading horizon Steel Authority of is expected to under-perform the Tamilnad Mercantile. In addition to that, Steel Authority is 2.42 times more volatile than Tamilnad Mercantile Bank. It trades about -0.16 of its total potential returns per unit of risk. Tamilnad Mercantile Bank is currently generating about -0.17 per unit of volatility. If you would invest 45,885 in Tamilnad Mercantile Bank on October 26, 2024 and sell it today you would lose (1,610) from holding Tamilnad Mercantile Bank or give up 3.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Steel Authority of vs. Tamilnad Mercantile Bank
Performance |
| Timeline |
| Steel Authority |
| Tamilnad Mercantile Bank |
Steel Authority and Tamilnad Mercantile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Authority and Tamilnad Mercantile
The main advantage of trading using opposite Steel Authority and Tamilnad Mercantile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Authority position performs unexpectedly, Tamilnad Mercantile 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 Tamilnad Mercantile will offset losses from the drop in Tamilnad Mercantile's long position.| Steel Authority vs. NMDC Limited | Steel Authority vs. Embassy Office Parks | Steel Authority vs. Jai Balaji Industries | Steel Authority vs. Gujarat Narmada Valley |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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