Correlation Between Tata Steel and Roper Technologies

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

By analyzing existing cross correlation between Tata Steel Limited and Roper Technologies, you can compare the effects of market volatilities on Tata Steel and Roper Technologies 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 Roper Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Steel and Roper Technologies.

Diversification Opportunities for Tata Steel and Roper Technologies

0.49

Correlation Coefficient

Tata Steel  Roper Technologies

Very weak diversification

The 3 months correlation between Tata and Roper is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Limited and Roper Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roper Technologies 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 Limited are associated (or correlated) with Roper Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roper Technologies has no effect on the direction of Tata Steel i.e., Tata Steel and Roper Technologies go up and down completely randomly.

Pair Corralation between Tata Steel and Roper Technologies

Assuming the 90 days trading horizon Tata Steel Limited is expected to generate 1.69 times more return on investment than Roper Technologies. However, Tata Steel is 1.69 times more volatile than Roper Technologies. It trades about 0.12 of its potential returns per unit of risk. Roper Technologies is currently generating about 0.17 per unit of risk. If you would invest  1,580  in Tata Steel Limited on December 30, 2024 and sell it today you would earn a total of  225.00  from holding Tata Steel Limited or generate 14.24% return on investment over 90 days.

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

Tata Steel Limited  vs.  Roper Technologies

Tata Steel Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tata Steel Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Tata Steel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Roper Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Roper Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Roper Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tata Steel and Roper Technologies

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

The idea behind Tata Steel Limited and Roper Technologies 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.