Correlation Between Tata Steel and Axis Bank

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

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

Diversification Opportunities for Tata Steel and Axis Bank

-0.61

Correlation Coefficient

Tata Steel  Axis Bank

Excellent diversification

The 3 months correlation between Tata and Axis is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Limited and Axis Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axis Bank and Tata 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 Tata Steel Limited are associated (or correlated) with Axis Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axis Bank has no effect on the direction of Tata Steel i.e., Tata Steel and Axis Bank go up and down completely randomly.

Pair Corralation between Tata Steel and Axis Bank

Assuming the 90 days trading horizon Tata Steel Limited is expected to generate 0.22 times more return on investment than Axis Bank. However, Tata Steel Limited is 4.48 times less risky than Axis Bank. It trades about 0.11 of its potential returns per unit of risk. Axis Bank Ltd is currently generating about -0.14 per unit of risk. If you would invest  1,592  in Tata Steel Limited on April 24, 2025 and sell it today you would earn a total of  303.00  from holding Tata Steel Limited or generate 19.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Tata Steel Limited  vs.  Axis Bank Ltd

Tata Steel Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tata Steel Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, Tata Steel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Axis Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Axis Bank Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in August 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Tata Steel and Axis Bank

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

The idea behind Tata Steel Limited and Axis Bank Ltd 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..