Correlation Between Tata Steel and CleanTech Lithium
Can any of the company-specific risk be diversified away by investing in both Tata Steel and CleanTech Lithium 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 CleanTech Lithium 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 CleanTech Lithium plc, you can compare the effects of market volatilities on Tata Steel and CleanTech Lithium 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 CleanTech Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Steel and CleanTech Lithium.
Diversification Opportunities for Tata Steel and CleanTech Lithium
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tata and CleanTech is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Limited and CleanTech Lithium plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CleanTech Lithium plc 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 CleanTech Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CleanTech Lithium plc has no effect on the direction of Tata Steel i.e., Tata Steel and CleanTech Lithium go up and down completely randomly.
Pair Corralation between Tata Steel and CleanTech Lithium
Assuming the 90 days trading horizon Tata Steel Limited is expected to generate 0.49 times more return on investment than CleanTech Lithium. However, Tata Steel Limited is 2.05 times less risky than CleanTech Lithium. It trades about -0.18 of its potential returns per unit of risk. CleanTech Lithium plc is currently generating about -0.13 per unit of risk. If you would invest 1,685 in Tata Steel Limited on October 28, 2024 and sell it today you would lose (185.00) from holding Tata Steel Limited or give up 10.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tata Steel Limited vs. CleanTech Lithium plc
Performance |
| Timeline |
| Tata Steel Limited |
| CleanTech Lithium plc |
Tata Steel and CleanTech Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tata Steel and CleanTech Lithium
The main advantage of trading using opposite Tata Steel and CleanTech Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tata Steel position performs unexpectedly, CleanTech Lithium 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 CleanTech Lithium will offset losses from the drop in CleanTech Lithium's long position.| Tata Steel vs. Givaudan SA | Tata Steel vs. Antofagasta PLC | Tata Steel vs. Ferrexpo PLC | Tata Steel vs. Atalaya Mining |
| CleanTech Lithium vs. TBC Bank Group | CleanTech Lithium vs. Take Two Interactive Software | CleanTech Lithium vs. VPC Specialty Lending | CleanTech Lithium vs. Metro Bank PLC |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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