Correlation Between Jindal Steel and Tata Communications

Can any of the company-specific risk be diversified away by investing in both Jindal Steel and Tata Communications 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 Jindal Steel and Tata Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jindal Steel Power and Tata Communications Limited, you can compare the effects of market volatilities on Jindal Steel and Tata Communications 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 Jindal Steel with a short position of Tata Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jindal Steel and Tata Communications.

Diversification Opportunities for Jindal Steel and Tata Communications

0.4

Correlation Coefficient

Jindal Steel  Tata Communications

Very weak diversification

The 3 months correlation between Jindal and Tata is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Jindal Steel Power and Tata Communications Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Communications and Jindal 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 Jindal Steel Power are associated (or correlated) with Tata Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Communications has no effect on the direction of Jindal Steel i.e., Jindal Steel and Tata Communications go up and down completely randomly.

Pair Corralation between Jindal Steel and Tata Communications

Assuming the 90 days trading horizon Jindal Steel Power is expected to under-perform the Tata Communications. But the stock apears to be less risky and, when comparing its historical volatility, Jindal Steel Power is 1.05 times less risky than Tata Communications. The stock trades about -0.01 of its potential returns per unit of risk. The Tata Communications Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  171,645  in Tata Communications Limited on October 23, 2024 and sell it today you would earn a total of  1,345  from holding Tata Communications Limited or generate 0.78% return on investment over 90 days.

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

Jindal Steel Power  vs.  Tata Communications Limited

Jindal Steel Power

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jindal Steel Power are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Jindal Steel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Tata Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Communications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Tata Communications is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Jindal Steel and Tata Communications

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

The idea behind Jindal Steel Power and Tata Communications Limited 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.