Correlation Between Tata Steel and General Environmental

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

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

Diversification Opportunities for Tata Steel and General Environmental

0.61

Correlation Coefficient

Tata Steel  General Environmental

Poor diversification

The 3 months correlation between Tata and General is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Public and General Environmental Conserva in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Environmental and Tata 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 Tata Steel Public are associated (or correlated) with General Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Environmental has no effect on the direction of Tata Steel i.e., Tata Steel and General Environmental go up and down completely randomly.

Pair Corralation between Tata Steel and General Environmental

Assuming the 90 days trading horizon Tata Steel is expected to generate 1.02 times less return on investment than General Environmental. In addition to that, Tata Steel is 1.0 times more volatile than General Environmental Conservation. It trades about 0.04 of its total potential returns per unit of risk. General Environmental Conservation is currently generating about 0.04 per unit of volatility. If you would invest  63.00  in General Environmental Conservation on October 4, 2024 and sell it today you would lose (20.00) from holding General Environmental Conservation or give up 31.75% of portfolio value over 90 days.

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

Tata Steel Public  vs.  General Environmental Conserva

Tata Steel Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Steel Public 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 forward-looking signals 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.

General Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Environmental Conservation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Tata Steel and General Environmental

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

The idea behind Tata Steel Public and General Environmental Conservation 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.