Correlation Between Cantabil Retail and Tera Software

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

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

Diversification Opportunities for Cantabil Retail and Tera Software

0.4

Correlation Coefficient

Cantabil Retail  Tera Software

Very weak diversification

The 3 months correlation between Cantabil and Tera is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Cantabil Retail India and Tera Software Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tera Software Limited and Cantabil Retail 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 Cantabil Retail India are associated (or correlated) with Tera Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tera Software Limited has no effect on the direction of Cantabil Retail i.e., Cantabil Retail and Tera Software go up and down completely randomly.

Pair Corralation between Cantabil Retail and Tera Software

Assuming the 90 days trading horizon Cantabil Retail India is expected to generate 1.12 times more return on investment than Tera Software. However, Cantabil Retail is 1.12 times more volatile than Tera Software Limited. It trades about 0.02 of its potential returns per unit of risk. Tera Software Limited is currently generating about 0.01 per unit of risk. If you would invest  26,489  in Cantabil Retail India on December 26, 2024 and sell it today you would lose (18.00) from holding Cantabil Retail India or give up 0.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Cantabil Retail India  vs.  Tera Software Limited

Cantabil Retail India

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cantabil Retail India are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Cantabil Retail is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Tera Software Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tera Software Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tera Software is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cantabil Retail and Tera Software

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

The idea behind Cantabil Retail India and Tera Software 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 Global Correlations module to find global opportunities by holding instruments from different markets.