Correlation Between Tata Steel and GoldMining
Can any of the company-specific risk be diversified away by investing in both Tata Steel and GoldMining 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 GoldMining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tata Steel Limited and GoldMining, you can compare the effects of market volatilities on Tata Steel and GoldMining 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 GoldMining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Steel and GoldMining.
Diversification Opportunities for Tata Steel and GoldMining
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tata and GoldMining is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Limited and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining 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 Limited are associated (or correlated) with GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of Tata Steel i.e., Tata Steel and GoldMining go up and down completely randomly.
Pair Corralation between Tata Steel and GoldMining
Assuming the 90 days trading horizon Tata Steel Limited is expected to under-perform the GoldMining. But the stock apears to be less risky and, when comparing its historical volatility, Tata Steel Limited is 1.32 times less risky than GoldMining. The stock trades about -0.03 of its potential returns per unit of risk. The GoldMining is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 120.00 in GoldMining on September 3, 2024 and sell it today you would earn a total of 0.00 from holding GoldMining or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 61.9% |
| Values | Daily Returns |
Tata Steel Limited vs. GoldMining
Performance |
| Timeline |
| Tata Steel Limited |
| GoldMining |
Tata Steel and GoldMining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tata Steel and GoldMining
The main advantage of trading using opposite Tata Steel and GoldMining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tata Steel position performs unexpectedly, GoldMining 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 GoldMining will offset losses from the drop in GoldMining's long position.| Tata Steel vs. Givaudan SA | Tata Steel vs. Atalaya Mining | Tata Steel vs. Central Asia Metals | Tata Steel vs. Metals Exploration Plc |
| GoldMining vs. Catalyst Media Group | GoldMining vs. CATLIN GROUP | GoldMining vs. Tamburi Investment Partners | GoldMining vs. Magnora ASA |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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