Correlation Between Computer Age and Zomato

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

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

Diversification Opportunities for Computer Age and Zomato

0.87

Correlation Coefficient

Computer Age  Zomato

Very poor diversification

The 3 months correlation between Computer and Zomato is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Computer Age Management and Zomato Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zomato Limited and Computer Age 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 Computer Age Management are associated (or correlated) with Zomato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zomato Limited has no effect on the direction of Computer Age i.e., Computer Age and Zomato go up and down completely randomly.

Pair Corralation between Computer Age and Zomato

Assuming the 90 days trading horizon Computer Age Management is expected to generate 0.77 times more return on investment than Zomato. However, Computer Age Management is 1.29 times less risky than Zomato. It trades about -0.01 of its potential returns per unit of risk. Zomato Limited is currently generating about -0.07 per unit of risk. If you would invest  426,295  in Computer Age Management on October 26, 2024 and sell it today you would lose (10,370) from holding Computer Age Management or give up 2.43% of portfolio value over 90 days.

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

Computer Age Management  vs.  Zomato Limited

Computer Age Management

Risk-Adjusted Performance

0 of 100

Very Weak

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

Zomato Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zomato Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Computer Age and Zomato

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

The idea behind Computer Age Management and Zomato 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.