Correlation Between JLEN Environmental and Tata Steel

Can any of the company-specific risk be diversified away by investing in both JLEN Environmental and Tata Steel 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 JLEN Environmental and Tata Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JLEN Environmental Assets and Tata Steel Limited, you can compare the effects of market volatilities on JLEN Environmental and Tata Steel 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 JLEN Environmental with a short position of Tata Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of JLEN Environmental and Tata Steel.

Diversification Opportunities for JLEN Environmental and Tata Steel

0.71

Correlation Coefficient

JLEN Environmental  Tata Steel

Poor diversification

The 3 months correlation between JLEN and Tata is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding JLEN Environmental Assets and Tata Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Steel Limited and JLEN Environmental 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 JLEN Environmental Assets are associated (or correlated) with Tata Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Steel Limited has no effect on the direction of JLEN Environmental i.e., JLEN Environmental and Tata Steel go up and down completely randomly.

Pair Corralation between JLEN Environmental and Tata Steel

Assuming the 90 days trading horizon JLEN Environmental Assets is expected to under-perform the Tata Steel. But the stock apears to be less risky and, when comparing its historical volatility, JLEN Environmental Assets is 1.48 times less risky than Tata Steel. The stock trades about -0.27 of its potential returns per unit of risk. The Tata Steel Limited is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,810  in Tata Steel Limited on September 13, 2024 and sell it today you would lose (40.00) from holding Tata Steel Limited or give up 2.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.19%
Values	Daily Returns

JLEN Environmental Assets  vs.  Tata Steel Limited

JLEN Environmental Assets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JLEN Environmental Assets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 quite persistent essential indicators, Tata Steel is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with JLEN Environmental and Tata Steel

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

The idea behind JLEN Environmental Assets and Tata Steel Limited 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.