Correlation Between CSP Steel and Tata Steel

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

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

Diversification Opportunities for CSP Steel and Tata Steel

0.52

Correlation Coefficient

CSP Steel  Tata Steel

Very weak diversification

The 3 months correlation between CSP and Tata is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding CSP Steel Center 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 CSP Steel 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 CSP Steel Center 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 CSP Steel i.e., CSP Steel and Tata Steel go up and down completely randomly.

Pair Corralation between CSP Steel and Tata Steel

Assuming the 90 days trading horizon CSP Steel Center is expected to generate 1.6 times more return on investment than Tata Steel. However, CSP Steel is 1.6 times more volatile than Tata Steel Public. It trades about 0.04 of its potential returns per unit of risk. Tata Steel Public is currently generating about 0.04 per unit of risk. If you would invest  48.00  in CSP Steel Center on April 24, 2025 and sell it today you would earn a total of  2.00  from holding CSP Steel Center or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

CSP Steel Center  vs.  Tata Steel Public

CSP Steel Center

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CSP Steel Center are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, CSP Steel may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Tata Steel Public

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tata Steel Public are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Tata Steel may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with CSP Steel and Tata Steel

The main advantage of trading using opposite CSP Steel and Tata Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSP Steel 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 CSP Steel Center 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.