Correlation Between Tata Steel and Airports
Can any of the company-specific risk be diversified away by investing in both Tata Steel and Airports 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 Tata Steel and Airports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tata Steel Public and Airports of Thailand, you can compare the effects of market volatilities on Tata Steel and Airports 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 Tata Steel with a short position of Airports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Steel and Airports.
Diversification Opportunities for Tata Steel and Airports
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tata and Airports is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Public and Airports of Thailand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airports of Thailand and Tata Steel 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 Tata Steel Public are associated (or correlated) with Airports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airports of Thailand has no effect on the direction of Tata Steel i.e., Tata Steel and Airports go up and down completely randomly.
Pair Corralation between Tata Steel and Airports
Assuming the 90 days trading horizon Tata Steel Public is expected to generate 119.35 times more return on investment than Airports. However, Tata Steel is 119.35 times more volatile than Airports of Thailand. It trades about 0.12 of its potential returns per unit of risk. Airports of Thailand is currently generating about 0.04 per unit of risk. 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 Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tata Steel Public vs. Airports of Thailand
Performance |
| Timeline |
| Tata Steel Public |
| Airports of Thailand |
Tata Steel and Airports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tata Steel and Airports
The main advantage of trading using opposite Tata Steel and Airports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tata Steel position performs unexpectedly, Airports 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 Airports will offset losses from the drop in Airports' long position.| Tata Steel vs. PTT Public | Tata Steel vs. PTT Exploration and | Tata Steel vs. CP ALL Public | Tata Steel vs. Kasikornbank Public |
| Airports vs. CP ALL Public | Airports vs. PTT Public | Airports vs. Kasikornbank Public | Airports vs. Bangkok Dusit Medical |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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