Correlation Between Tata Steel and Sage Group
Can any of the company-specific risk be diversified away by investing in both Tata Steel and Sage Group 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 Sage Group 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 Sage Group PLC, you can compare the effects of market volatilities on Tata Steel and Sage Group 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 Sage Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Steel and Sage Group.
Diversification Opportunities for Tata Steel and Sage Group
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tata and Sage is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Limited and Sage Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sage Group 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 Sage Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sage Group PLC has no effect on the direction of Tata Steel i.e., Tata Steel and Sage Group go up and down completely randomly.
Pair Corralation between Tata Steel and Sage Group
Assuming the 90 days trading horizon Tata Steel Limited is expected to under-perform the Sage Group. In addition to that, Tata Steel is 1.63 times more volatile than Sage Group PLC. It trades about -0.67 of its total potential returns per unit of risk. Sage Group PLC is currently generating about 0.12 per unit of volatility. If you would invest 127,618 in Sage Group PLC on October 12, 2024 and sell it today you would earn a total of 2,232 from holding Sage Group PLC or generate 1.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tata Steel Limited vs. Sage Group PLC
Performance |
| Timeline |
| Tata Steel Limited |
| Sage Group PLC |
Tata Steel and Sage Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tata Steel and Sage Group
The main advantage of trading using opposite Tata Steel and Sage Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tata Steel position performs unexpectedly, Sage Group 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 Sage Group will offset losses from the drop in Sage Group's long position.| Tata Steel vs. Antofagasta PLC | Tata Steel vs. Atalaya Mining | Tata Steel vs. Central Asia Metals | Tata Steel vs. Anglo Asian Mining |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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