Correlation Between Tech Mahindra and Steel Authority

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

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

Diversification Opportunities for Tech Mahindra and Steel Authority

-0.18

Correlation Coefficient

Tech Mahindra  Steel Authority

Good diversification

The 3 months correlation between Tech and Steel is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Tech Mahindra Limited and Steel Authority of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Authority and Tech Mahindra 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 Tech Mahindra Limited are associated (or correlated) with Steel Authority. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Authority has no effect on the direction of Tech Mahindra i.e., Tech Mahindra and Steel Authority go up and down completely randomly.

Pair Corralation between Tech Mahindra and Steel Authority

Assuming the 90 days trading horizon Tech Mahindra Limited is expected to under-perform the Steel Authority. But the stock apears to be less risky and, when comparing its historical volatility, Tech Mahindra Limited is 1.46 times less risky than Steel Authority. The stock trades about -0.18 of its potential returns per unit of risk. The Steel Authority of is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  11,173  in Steel Authority of on December 30, 2024 and sell it today you would earn a total of  345.00  from holding Steel Authority of or generate 3.09% return on investment over 90 days.

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

Tech Mahindra Limited  vs.  Steel Authority of

Tech Mahindra Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tech Mahindra Limited 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 fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Steel Authority

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Authority of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Steel Authority is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Tech Mahindra and Steel Authority

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

The idea behind Tech Mahindra Limited and Steel Authority of 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.