Correlation Between Tata Steel and Nawarat Patanakarn

Can any of the company-specific risk be diversified away by investing in both Tata Steel and Nawarat Patanakarn 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 Nawarat Patanakarn 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 Nawarat Patanakarn Public, you can compare the effects of market volatilities on Tata Steel and Nawarat Patanakarn 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 Nawarat Patanakarn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Steel and Nawarat Patanakarn.

Diversification Opportunities for Tata Steel and Nawarat Patanakarn

0.61

Correlation Coefficient

Tata Steel  Nawarat Patanakarn

Poor diversification

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

Pair Corralation between Tata Steel and Nawarat Patanakarn

Assuming the 90 days trading horizon Tata Steel Public is expected to under-perform the Nawarat Patanakarn. But the stock apears to be less risky and, when comparing its historical volatility, Tata Steel Public is 2.43 times less risky than Nawarat Patanakarn. The stock trades about -0.2 of its potential returns per unit of risk. The Nawarat Patanakarn Public is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Nawarat Patanakarn Public on December 4, 2024 and sell it today you would lose (6.00) from holding Nawarat Patanakarn Public or give up 37.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Tata Steel Public  vs.  Nawarat Patanakarn Public

Tata Steel Public

Risk-Adjusted Performance

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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Nawarat Patanakarn Public

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Tata Steel and Nawarat Patanakarn

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

The idea behind Tata Steel Public and Nawarat Patanakarn 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.