Correlation Between Indian Metals and TATA SUMER

Can any of the company-specific risk be diversified away by investing in both Indian Metals and TATA SUMER 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 Indian Metals and TATA SUMER into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indian Metals Ferro and TATA SUMER PRODUCTS, you can compare the effects of market volatilities on Indian Metals and TATA SUMER 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 Indian Metals with a short position of TATA SUMER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Metals and TATA SUMER.

Diversification Opportunities for Indian Metals and TATA SUMER

-0.68

Correlation Coefficient

Indian Metals  TATA SUMER

Excellent diversification

The 3 months correlation between Indian and TATA is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and TATA SUMER PRODUCTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TATA SUMER PRODUCTS and Indian Metals 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 Indian Metals Ferro are associated (or correlated) with TATA SUMER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TATA SUMER PRODUCTS has no effect on the direction of Indian Metals i.e., Indian Metals and TATA SUMER go up and down completely randomly.

Pair Corralation between Indian Metals and TATA SUMER

Assuming the 90 days trading horizon Indian Metals Ferro is expected to under-perform the TATA SUMER. In addition to that, Indian Metals is 2.27 times more volatile than TATA SUMER PRODUCTS. It trades about -0.1 of its total potential returns per unit of risk. TATA SUMER PRODUCTS is currently generating about 0.13 per unit of volatility. If you would invest  93,395  in TATA SUMER PRODUCTS on October 10, 2024 and sell it today you would earn a total of  2,765  from holding TATA SUMER PRODUCTS or generate 2.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Indian Metals Ferro  vs.  TATA SUMER PRODUCTS

Indian Metals Ferro

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

TATA SUMER PRODUCTS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TATA SUMER PRODUCTS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Indian Metals and TATA SUMER

The main advantage of trading using opposite Indian Metals and TATA SUMER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Metals position performs unexpectedly, TATA SUMER 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 TATA SUMER will offset losses from the drop in TATA SUMER's long position.

The idea behind Indian Metals Ferro and TATA SUMER PRODUCTS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.