Correlation Between Tata Steel and Auction Technology

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

Diversification Opportunities for Tata Steel and Auction Technology

-0.52

Correlation Coefficient

Tata Steel  Auction Technology

Excellent diversification

The 3 months correlation between Tata and Auction is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Limited and Auction Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auction Technology 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 Auction Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auction Technology has no effect on the direction of Tata Steel i.e., Tata Steel and Auction Technology go up and down completely randomly.

Pair Corralation between Tata Steel and Auction Technology

Assuming the 90 days trading horizon Tata Steel Limited is expected to under-perform the Auction Technology. But the stock apears to be less risky and, when comparing its historical volatility, Tata Steel Limited is 1.48 times less risky than Auction Technology. The stock trades about -0.12 of its potential returns per unit of risk. The Auction Technology Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  41,050  in Auction Technology Group on September 25, 2024 and sell it today you would earn a total of  14,350  from holding Auction Technology Group or generate 34.96% return on investment over 90 days.

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

Tata Steel Limited  vs.  Auction Technology Group

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 uncertain performance in the last few months, the Stock's essential indicators 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.

Auction Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Auction Technology Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Auction Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tata Steel and Auction Technology

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

The idea behind Tata Steel Limited and Auction Technology Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..