Correlation Between Thantawan Industry and Tata Steel

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

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

Diversification Opportunities for Thantawan Industry and Tata Steel

0.45

Correlation Coefficient

Thantawan Industry  Tata Steel

Very weak diversification

The 3 months correlation between Thantawan and Tata is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Thantawan Industry Public and Tata Steel Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Steel Public and Thantawan Industry 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 Thantawan Industry Public 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 Public has no effect on the direction of Thantawan Industry i.e., Thantawan Industry and Tata Steel go up and down completely randomly.

Pair Corralation between Thantawan Industry and Tata Steel

Assuming the 90 days trading horizon Thantawan Industry Public is expected to under-perform the Tata Steel. But the stock apears to be less risky and, when comparing its historical volatility, Thantawan Industry Public is 31.21 times less risky than Tata Steel. The stock trades about -0.02 of its potential returns per unit of risk. The Tata Steel Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  107.00  in Tata Steel Public on September 19, 2024 and sell it today you would lose (36.00) from holding Tata Steel Public or give up 33.64% of portfolio value over 90 days.

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

Thantawan Industry Public  vs.  Tata Steel Public

Thantawan Industry Public

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thantawan Industry Public are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Thantawan Industry is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Tata Steel Public

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tata Steel Public are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Tata Steel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thantawan Industry and Tata Steel

The main advantage of trading using opposite Thantawan Industry and Tata Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thantawan Industry 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 Thantawan Industry Public and Tata Steel Public 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.