Correlation Between NRB Industrial and Tata Investment

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

By analyzing existing cross correlation between NRB Industrial Bearings and Tata Investment, you can compare the effects of market volatilities on NRB Industrial and Tata Investment 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 NRB Industrial with a short position of Tata Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRB Industrial and Tata Investment.

Diversification Opportunities for NRB Industrial and Tata Investment

0.31

Correlation Coefficient

NRB Industrial  Tata Investment

Weak diversification

The 3 months correlation between NRB and Tata is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding NRB Industrial Bearings and Tata Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Investment and NRB Industrial 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 NRB Industrial Bearings are associated (or correlated) with Tata Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Investment has no effect on the direction of NRB Industrial i.e., NRB Industrial and Tata Investment go up and down completely randomly.

Pair Corralation between NRB Industrial and Tata Investment

Assuming the 90 days trading horizon NRB Industrial Bearings is expected to under-perform the Tata Investment. In addition to that, NRB Industrial is 1.97 times more volatile than Tata Investment. It trades about -0.15 of its total potential returns per unit of risk. Tata Investment is currently generating about -0.05 per unit of volatility. If you would invest  694,590  in Tata Investment on September 23, 2024 and sell it today you would lose (40,465) from holding Tata Investment or give up 5.83% of portfolio value over 90 days.

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

NRB Industrial Bearings  vs.  Tata Investment

NRB Industrial Bearings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NRB Industrial Bearings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady 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 Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Tata Investment is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with NRB Industrial and Tata Investment

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

The idea behind NRB Industrial Bearings and Tata Investment 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.