Correlation Between Tata Steel and Rockworth Public

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

Diversification Opportunities for Tata Steel and Rockworth Public

-0.25

Correlation Coefficient

Tata Steel  Rockworth Public

Very good diversification

The 3 months correlation between Tata and Rockworth is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Public and Rockworth Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockworth 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 Rockworth Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockworth Public has no effect on the direction of Tata Steel i.e., Tata Steel and Rockworth Public go up and down completely randomly.

Pair Corralation between Tata Steel and Rockworth Public

Assuming the 90 days trading horizon Tata Steel Public is expected to under-perform the Rockworth Public. In addition to that, Tata Steel is 1.06 times more volatile than Rockworth Public. It trades about -0.39 of its total potential returns per unit of risk. Rockworth Public is currently generating about 0.14 per unit of volatility. If you would invest  1,020  in Rockworth Public on October 25, 2024 and sell it today you would earn a total of  70.00  from holding Rockworth Public or generate 6.86% return on investment over 90 days.

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

Tata Steel Public  vs.  Rockworth Public

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 conflicting 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.

Rockworth Public

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rockworth Public are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Rockworth Public is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Tata Steel and Rockworth Public

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

The idea behind Tata Steel Public and Rockworth 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.