Correlation Between Tata Steel and Gfinity PLC

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

Diversification Opportunities for Tata Steel and Gfinity PLC

-0.05

Correlation Coefficient

Tata Steel  Gfinity PLC

Good diversification

The 3 months correlation between Tata and Gfinity is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Limited and Gfinity PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gfinity PLC 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 Gfinity PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gfinity PLC has no effect on the direction of Tata Steel i.e., Tata Steel and Gfinity PLC go up and down completely randomly.

Pair Corralation between Tata Steel and Gfinity PLC

Assuming the 90 days trading horizon Tata Steel is expected to generate 7.2 times less return on investment than Gfinity PLC. But when comparing it to its historical volatility, Tata Steel Limited is 8.01 times less risky than Gfinity PLC. It trades about 0.11 of its potential returns per unit of risk. Gfinity PLC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5.50  in Gfinity PLC on December 22, 2024 and sell it today you would earn a total of  2.25  from holding Gfinity PLC or generate 40.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.32%
Values	Daily Returns

Tata Steel Limited  vs.  Gfinity PLC

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 8 (%) 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.

Gfinity PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gfinity PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gfinity PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tata Steel and Gfinity PLC

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

The idea behind Tata Steel Limited and Gfinity PLC 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.