Correlation Between TATA SUMER and Selan Exploration

Can any of the company-specific risk be diversified away by investing in both TATA SUMER and Selan Exploration 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 SUMER and Selan Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TATA SUMER PRODUCTS and Selan Exploration Technology, you can compare the effects of market volatilities on TATA SUMER and Selan Exploration 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 SUMER with a short position of Selan Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of TATA SUMER and Selan Exploration.

Diversification Opportunities for TATA SUMER and Selan Exploration

0.0

Correlation Coefficient

TATA SUMER  Selan Exploration

Pay attention - limited upside

The 3 months correlation between TATA and Selan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding TATA SUMER PRODUCTS and Selan Exploration Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selan Exploration and TATA SUMER 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 SUMER PRODUCTS are associated (or correlated) with Selan Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selan Exploration has no effect on the direction of TATA SUMER i.e., TATA SUMER and Selan Exploration go up and down completely randomly.

Pair Corralation between TATA SUMER and Selan Exploration

Assuming the 90 days trading horizon TATA SUMER PRODUCTS is expected to under-perform the Selan Exploration. But the stock apears to be less risky and, when comparing its historical volatility, TATA SUMER PRODUCTS is 1.65 times less risky than Selan Exploration. The stock trades about -0.26 of its potential returns per unit of risk. The Selan Exploration Technology is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  89,110  in Selan Exploration Technology on September 14, 2024 and sell it today you would lose (1,425) from holding Selan Exploration Technology or give up 1.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

TATA SUMER PRODUCTS  vs.  Selan Exploration Technology

TATA SUMER PRODUCTS

Risk-Adjusted Performance

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Very Weak

Over the last 90 days TATA SUMER PRODUCTS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Selan Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Selan Exploration Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Selan Exploration is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with TATA SUMER and Selan Exploration

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

The idea behind TATA SUMER PRODUCTS and Selan Exploration Technology 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.