Correlation Between Aptech and Tata Communications

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

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

Diversification Opportunities for Aptech and Tata Communications

0.89

Correlation Coefficient

Aptech  Tata Communications

Very poor diversification

The 3 months correlation between Aptech and Tata is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Aptech Limited and Tata Communications Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Communications and Aptech 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 Aptech Limited are associated (or correlated) with Tata Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Communications has no effect on the direction of Aptech i.e., Aptech and Tata Communications go up and down completely randomly.

Pair Corralation between Aptech and Tata Communications

Assuming the 90 days trading horizon Aptech is expected to generate 1.74 times less return on investment than Tata Communications. In addition to that, Aptech is 2.45 times more volatile than Tata Communications Limited. It trades about 0.01 of its total potential returns per unit of risk. Tata Communications Limited is currently generating about 0.05 per unit of volatility. If you would invest  124,162  in Tata Communications Limited on September 20, 2024 and sell it today you would earn a total of  55,393  from holding Tata Communications Limited or generate 44.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Aptech Limited  vs.  Tata Communications Limited

Aptech Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aptech Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Tata Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Communications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Aptech and Tata Communications

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

The idea behind Aptech Limited and Tata Communications Limited 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.