Correlation Between CEAT and Star Health

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

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

Diversification Opportunities for CEAT and Star Health

0.71

Correlation Coefficient

CEAT  Star Health

Poor diversification

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

Pair Corralation between CEAT and Star Health

Assuming the 90 days trading horizon CEAT Limited is expected to generate 1.19 times more return on investment than Star Health. However, CEAT is 1.19 times more volatile than Star Health and. It trades about -0.16 of its potential returns per unit of risk. Star Health and is currently generating about -0.4 per unit of risk. If you would invest  379,890  in CEAT Limited on April 7, 2025 and sell it today you would lose (18,910) from holding CEAT Limited or give up 4.98% of portfolio value over 90 days.

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

CEAT Limited  vs.  Star Health and

CEAT Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CEAT Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, CEAT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Star Health

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Star Health and are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady essential indicators, Star Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CEAT and Star Health

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

The idea behind CEAT Limited and Star Health and 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.