Correlation Between Tata Steel and Amaroq Minerals

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

Diversification Opportunities for Tata Steel and Amaroq Minerals

-0.82

Correlation Coefficient

Tata Steel  Amaroq Minerals

Pay attention - limited upside

The 3 months correlation between Tata and Amaroq is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Limited and Amaroq Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amaroq Minerals 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 Amaroq Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amaroq Minerals has no effect on the direction of Tata Steel i.e., Tata Steel and Amaroq Minerals go up and down completely randomly.

Pair Corralation between Tata Steel and Amaroq Minerals

Assuming the 90 days trading horizon Tata Steel Limited is expected to generate 0.84 times more return on investment than Amaroq Minerals. However, Tata Steel Limited is 1.2 times less risky than Amaroq Minerals. It trades about 0.12 of its potential returns per unit of risk. Amaroq Minerals is currently generating about -0.05 per unit of risk. If you would invest  1,580  in Tata Steel Limited on December 29, 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 Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Tata Steel Limited  vs.  Amaroq Minerals

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.

Amaroq Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amaroq Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Tata Steel and Amaroq Minerals

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

The idea behind Tata Steel Limited and Amaroq Minerals 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.