Correlation Between Tata Steel and IShares Physical

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

Diversification Opportunities for Tata Steel and IShares Physical

0.44

Correlation Coefficient

Tata Steel  IShares Physical

Very weak diversification

The 3 months correlation between Tata and IShares is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Limited and iShares Physical Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Physical Silver 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 IShares Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Physical Silver has no effect on the direction of Tata Steel i.e., Tata Steel and IShares Physical go up and down completely randomly.

Pair Corralation between Tata Steel and IShares Physical

Assuming the 90 days trading horizon Tata Steel Limited is expected to under-perform the IShares Physical. In addition to that, Tata Steel is 1.05 times more volatile than iShares Physical Silver. It trades about -0.18 of its total potential returns per unit of risk. iShares Physical Silver is currently generating about -0.09 per unit of volatility. If you would invest  3,094  in iShares Physical Silver on October 4, 2024 and sell it today you would lose (339.00) from holding iShares Physical Silver or give up 10.96% of portfolio value over 90 days.

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

Tata Steel Limited  vs.  iShares Physical Silver

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.

iShares Physical Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Physical Silver 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 IShares Physical

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

The idea behind Tata Steel Limited and iShares Physical Silver 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.