Correlation Between Tata Steel and Fine Metal
Can any of the company-specific risk be diversified away by investing in both Tata Steel and Fine Metal 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 Fine Metal 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 Fine Metal Technologies, you can compare the effects of market volatilities on Tata Steel and Fine Metal 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 Fine Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Steel and Fine Metal.
Diversification Opportunities for Tata Steel and Fine Metal
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Tata and Fine is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Public and Fine Metal Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fine Metal Technologies 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 Fine Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fine Metal Technologies has no effect on the direction of Tata Steel i.e., Tata Steel and Fine Metal go up and down completely randomly.
Pair Corralation between Tata Steel and Fine Metal
Assuming the 90 days trading horizon Tata Steel Public is expected to generate 0.74 times more return on investment than Fine Metal. However, Tata Steel Public is 1.36 times less risky than Fine Metal. It trades about 0.18 of its potential returns per unit of risk. Fine Metal Technologies is currently generating about 0.05 per unit of risk. If you would invest 67.00 in Tata Steel Public on September 14, 2024 and sell it today you would earn a total of 4.00 from holding Tata Steel Public or generate 5.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tata Steel Public vs. Fine Metal Technologies
Performance |
| Timeline |
| Tata Steel Public |
| Fine Metal Technologies |
Tata Steel and Fine Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tata Steel and Fine Metal
The main advantage of trading using opposite Tata Steel and Fine Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tata Steel position performs unexpectedly, Fine Metal 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 Fine Metal will offset losses from the drop in Fine Metal's long position.| Tata Steel vs. TMT Steel Public | Tata Steel vs. TPI Polene Public | Tata Steel vs. Thoresen Thai Agencies | Tata Steel vs. TRC Construction Public |
| Fine Metal vs. GFPT Public | Fine Metal vs. Kulthorn Kirby Public | Fine Metal vs. Chumporn Palm Oil | Fine Metal vs. Haad Thip 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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