Correlation Between Tata Motors and Standard Bank

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

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

Diversification Opportunities for Tata Motors and Standard Bank

0.48

Correlation Coefficient

Tata Motors  Standard Bank

Very weak diversification

The 3 months correlation between Tata and Standard is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Tata Motors Limited and Standard Bank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Bank Group and Tata Motors 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 Motors Limited are associated (or correlated) with Standard Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Bank Group has no effect on the direction of Tata Motors i.e., Tata Motors and Standard Bank go up and down completely randomly.

Pair Corralation between Tata Motors and Standard Bank

If you would invest  2,514  in Tata Motors Limited on January 26, 2024 and sell it today you would earn a total of  0.00  from holding Tata Motors Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.61%
Values	Daily Returns

Tata Motors Limited  vs.  Standard Bank Group

Tata Motors Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Motors Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Tata Motors is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Standard Bank Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Standard Bank Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tata Motors and Standard Bank

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

The idea behind Tata Motors Limited and Standard Bank Group 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.