Correlation Between Jay Mart and Tata Steel

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

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

Diversification Opportunities for Jay Mart and Tata Steel

-0.13

Correlation Coefficient

Jay Mart  Tata Steel

Good diversification

The 3 months correlation between Jay and Tata is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Jay Mart Public and Tata Steel Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Steel Public and Jay Mart 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 Jay Mart Public are associated (or correlated) with Tata Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Steel Public has no effect on the direction of Jay Mart i.e., Jay Mart and Tata Steel go up and down completely randomly.

Pair Corralation between Jay Mart and Tata Steel

Assuming the 90 days trading horizon Jay Mart Public is expected to generate 1.41 times more return on investment than Tata Steel. However, Jay Mart is 1.41 times more volatile than Tata Steel Public. It trades about 0.11 of its potential returns per unit of risk. Tata Steel Public is currently generating about 0.08 per unit of risk. If you would invest  1,593  in Jay Mart Public on September 22, 2024 and sell it today you would lose (323.00) from holding Jay Mart Public or give up 20.28% of portfolio value over 90 days.

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

Jay Mart Public  vs.  Tata Steel Public

Jay Mart Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jay Mart Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Jay Mart reported solid returns over the last few months and may actually be approaching a breakup point.

Tata Steel Public

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tata Steel Public are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Tata Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Jay Mart and Tata Steel

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

The idea behind Jay Mart Public and Tata Steel Public 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.