Correlation Between Tata Steel and Techno Medical

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

Diversification Opportunities for Tata Steel and Techno Medical

0.41

Correlation Coefficient

Tata Steel  Techno Medical

Very weak diversification

The 3 months correlation between Tata and Techno is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Public and Techno Medical Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techno Medical 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 Techno Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techno Medical Public has no effect on the direction of Tata Steel i.e., Tata Steel and Techno Medical go up and down completely randomly.

Pair Corralation between Tata Steel and Techno Medical

Assuming the 90 days trading horizon Tata Steel Public is expected to generate 1.29 times more return on investment than Techno Medical. However, Tata Steel is 1.29 times more volatile than Techno Medical Public. It trades about 0.01 of its potential returns per unit of risk. Techno Medical Public is currently generating about -0.24 per unit of risk. If you would invest  66.00  in Tata Steel Public on September 22, 2024 and sell it today you would earn a total of  0.00  from holding Tata Steel Public or generate 0.0% return on investment over 90 days.

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

Tata Steel Public  vs.  Techno Medical Public

Tata Steel Public

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tata Steel Public are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Tata Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Techno Medical Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Techno Medical 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 fundamental drivers remain quite persistent which may send shares a bit higher in January 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 Techno Medical

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

The idea behind Tata Steel Public and Techno Medical 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.