Correlation Between Steelcast and TATA SUMER

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Can any of the company-specific risk be diversified away by investing in both Steelcast and TATA SUMER 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 Steelcast and TATA SUMER into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steelcast Limited and TATA SUMER PRODUCTS, you can compare the effects of market volatilities on Steelcast and TATA SUMER 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 Steelcast with a short position of TATA SUMER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steelcast and TATA SUMER.

Diversification Opportunities for Steelcast and TATA SUMER

-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between Steelcast and TATA is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Steelcast Limited and TATA SUMER PRODUCTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TATA SUMER PRODUCTS and Steelcast 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 Steelcast Limited are associated (or correlated) with TATA SUMER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TATA SUMER PRODUCTS has no effect on the direction of Steelcast i.e., Steelcast and TATA SUMER go up and down completely randomly.

Pair Corralation between Steelcast and TATA SUMER

Assuming the 90 days trading horizon Steelcast Limited is expected to generate 1.74 times more return on investment than TATA SUMER. However, Steelcast is 1.74 times more volatile than TATA SUMER PRODUCTS. It trades about 0.05 of its potential returns per unit of risk. TATA SUMER PRODUCTS is currently generating about 0.03 per unit of risk. If you would invest  50,802  in Steelcast Limited on September 2, 2024 and sell it today you would earn a total of  28,998  from holding Steelcast Limited or generate 57.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Steelcast Limited  vs.  TATA SUMER PRODUCTS

 Performance 
       Timeline  
Steelcast Limited 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Steelcast Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Steelcast sustained solid returns over the last few months and may actually be approaching a breakup point.
TATA SUMER PRODUCTS 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days TATA SUMER PRODUCTS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Steelcast and TATA SUMER Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Steelcast and TATA SUMER

The main advantage of trading using opposite Steelcast and TATA SUMER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steelcast position performs unexpectedly, TATA SUMER 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 SUMER will offset losses from the drop in TATA SUMER's long position.
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The idea behind Steelcast Limited and TATA SUMER PRODUCTS 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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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 Global Correlations module to find global opportunities by holding instruments from different markets.

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