Correlation Between Tata Steel and Baker Steel
Can any of the company-specific risk be diversified away by investing in both Tata Steel and Baker Steel 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 Baker Steel 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 Baker Steel Resources, you can compare the effects of market volatilities on Tata Steel and Baker Steel 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 Baker Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Steel and Baker Steel.
Diversification Opportunities for Tata Steel and Baker Steel
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tata and Baker is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Limited and Baker Steel Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Steel Resources 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 Baker Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baker Steel Resources has no effect on the direction of Tata Steel i.e., Tata Steel and Baker Steel go up and down completely randomly.
Pair Corralation between Tata Steel and Baker Steel
Assuming the 90 days trading horizon Tata Steel Limited is expected to under-perform the Baker Steel. But the stock apears to be less risky and, when comparing its historical volatility, Tata Steel Limited is 1.07 times less risky than Baker Steel. The stock trades about -0.06 of its potential returns per unit of risk. The Baker Steel Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,000 in Baker Steel Resources on August 31, 2024 and sell it today you would earn a total of 750.00 from holding Baker Steel Resources or generate 15.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tata Steel Limited vs. Baker Steel Resources
Performance |
| Timeline |
| Tata Steel Limited |
| Baker Steel Resources |
Tata Steel and Baker Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tata Steel and Baker Steel
The main advantage of trading using opposite Tata Steel and Baker Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tata Steel position performs unexpectedly, Baker Steel 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 Baker Steel will offset losses from the drop in Baker Steel's long position.| Tata Steel vs. State Bank of | Tata Steel vs. Reliance Industries Limited | Tata Steel vs. Larsen Toubro Limited | Tata Steel vs. Axis Bank Ltd |
| Baker Steel vs. One Media iP | Baker Steel vs. Associated British Foods | Baker Steel vs. Hollywood Bowl Group | Baker Steel vs. Liberty Media Corp |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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