Correlation Between Tata Steel and Trellus Health

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

Diversification Opportunities for Tata Steel and Trellus Health

-0.45

Correlation Coefficient

Tata Steel  Trellus Health

Very good diversification

The 3 months correlation between Tata and Trellus is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Limited and Trellus Health plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trellus Health 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 Trellus Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trellus Health plc has no effect on the direction of Tata Steel i.e., Tata Steel and Trellus Health go up and down completely randomly.

Pair Corralation between Tata Steel and Trellus Health

Assuming the 90 days trading horizon Tata Steel Limited is expected to under-perform the Trellus Health. But the stock apears to be less risky and, when comparing its historical volatility, Tata Steel Limited is 49.97 times less risky than Trellus Health. The stock trades about -0.11 of its potential returns per unit of risk. The Trellus Health plc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  68.00  in Trellus Health plc on October 23, 2024 and sell it today you would earn a total of  212.00  from holding Trellus Health plc or generate 311.76% 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.  Trellus Health plc

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 latest uncertain performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Trellus Health plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trellus Health plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Trellus Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tata Steel and Trellus Health

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

The idea behind Tata Steel Limited and Trellus Health 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.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.