Correlation Between Tata Steel and Zanaga Iron

Can any of the company-specific risk be diversified away by investing in both Tata Steel and Zanaga Iron 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 Zanaga Iron 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 Zanaga Iron Ore, you can compare the effects of market volatilities on Tata Steel and Zanaga Iron 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 Zanaga Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Steel and Zanaga Iron.

Diversification Opportunities for Tata Steel and Zanaga Iron

-0.16

Correlation Coefficient

Tata Steel  Zanaga Iron

Good diversification

The 3 months correlation between Tata and Zanaga is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Limited and Zanaga Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zanaga Iron Ore 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 Zanaga Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zanaga Iron Ore has no effect on the direction of Tata Steel i.e., Tata Steel and Zanaga Iron go up and down completely randomly.

Pair Corralation between Tata Steel and Zanaga Iron

Assuming the 90 days trading horizon Tata Steel Limited is expected to generate 0.77 times more return on investment than Zanaga Iron. However, Tata Steel Limited is 1.3 times less risky than Zanaga Iron. It trades about 0.07 of its potential returns per unit of risk. Zanaga Iron Ore is currently generating about -0.03 per unit of risk. If you would invest  1,612  in Tata Steel Limited on April 25, 2025 and sell it today you would earn a total of  163.00  from holding Tata Steel Limited or generate 10.11% return on investment over 90 days.

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

Tata Steel Limited  vs.  Zanaga Iron Ore

Tata Steel Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tata Steel Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Tata Steel may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Zanaga Iron Ore

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zanaga Iron Ore has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Zanaga Iron is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Tata Steel and Zanaga Iron

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

The idea behind Tata Steel Limited and Zanaga Iron Ore 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.