Correlation Between Tata Steel and Regional Container

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

Diversification Opportunities for Tata Steel and Regional Container

0.59

Correlation Coefficient

Tata Steel  Regional Container

Very weak diversification

The 3 months correlation between Tata and Regional is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Public and Regional Container Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Container Lines 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 Regional Container. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Container Lines has no effect on the direction of Tata Steel i.e., Tata Steel and Regional Container go up and down completely randomly.

Pair Corralation between Tata Steel and Regional Container

Assuming the 90 days trading horizon Tata Steel Public is expected to under-perform the Regional Container. In addition to that, Tata Steel is 1.31 times more volatile than Regional Container Lines. It trades about -0.14 of its total potential returns per unit of risk. Regional Container Lines is currently generating about -0.13 per unit of volatility. If you would invest  2,825  in Regional Container Lines on December 2, 2024 and sell it today you would lose (385.00) from holding Regional Container Lines or give up 13.63% of portfolio value over 90 days.

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

Tata Steel Public  vs.  Regional Container Lines

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 conflicting 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.

Regional Container Lines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regional Container Lines 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 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 Regional Container

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

The idea behind Tata Steel Public and Regional Container Lines 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.