Correlation Between Tata Steel and Sartorius Stedim

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

Diversification Opportunities for Tata Steel and Sartorius Stedim

-0.22

Correlation Coefficient

Tata Steel  Sartorius Stedim

Very good diversification

The 3 months correlation between Tata and Sartorius is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Limited and Sartorius Stedim Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sartorius Stedim Biotech 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 Sartorius Stedim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sartorius Stedim Biotech has no effect on the direction of Tata Steel i.e., Tata Steel and Sartorius Stedim go up and down completely randomly.

Pair Corralation between Tata Steel and Sartorius Stedim

Assuming the 90 days trading horizon Tata Steel Limited is expected to under-perform the Sartorius Stedim. But the stock apears to be less risky and, when comparing its historical volatility, Tata Steel Limited is 1.23 times less risky than Sartorius Stedim. The stock trades about -0.12 of its potential returns per unit of risk. The Sartorius Stedim Biotech is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  18,903  in Sartorius Stedim Biotech on October 25, 2024 and sell it today you would earn a total of  1,802  from holding Sartorius Stedim Biotech or generate 9.53% return on investment over 90 days.

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

Tata Steel Limited  vs.  Sartorius Stedim Biotech

Tata Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Steel Limited 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 essential indicators 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.

Sartorius Stedim Biotech

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sartorius Stedim Biotech are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Sartorius Stedim may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tata Steel and Sartorius Stedim

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

The idea behind Tata Steel Limited and Sartorius Stedim Biotech 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.