Correlation Between Supermarket Income and Tata Steel

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

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

Diversification Opportunities for Supermarket Income and Tata Steel

0.7

Correlation Coefficient

Supermarket Income  Tata Steel

Poor diversification

The 3 months correlation between Supermarket and Tata is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Supermarket Income REIT and Tata Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Steel Limited and Supermarket Income 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 Supermarket Income REIT 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 Limited has no effect on the direction of Supermarket Income i.e., Supermarket Income and Tata Steel go up and down completely randomly.

Pair Corralation between Supermarket Income and Tata Steel

Assuming the 90 days trading horizon Supermarket Income REIT is expected to under-perform the Tata Steel. But the stock apears to be less risky and, when comparing its historical volatility, Supermarket Income REIT is 1.63 times less risky than Tata Steel. The stock trades about -0.05 of its potential returns per unit of risk. The Tata Steel Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,315  in Tata Steel Limited on October 26, 2024 and sell it today you would earn a total of  185.00  from holding Tata Steel Limited or generate 14.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Supermarket Income REIT  vs.  Tata Steel Limited

Supermarket Income REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Supermarket Income REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Tata Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Supermarket Income and Tata Steel

The main advantage of trading using opposite Supermarket Income and Tata Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Supermarket Income 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 Supermarket Income REIT and Tata Steel 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.