Correlation Between Cholamandalam Investment and Delta Manufacturing

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

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

Diversification Opportunities for Cholamandalam Investment and Delta Manufacturing

-0.07

Correlation Coefficient

Cholamandalam Investment  Delta Manufacturing

Good diversification

The 3 months correlation between Cholamandalam and Delta is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Cholamandalam Investment and and Delta Manufacturing Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Manufacturing and Cholamandalam Investment 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 Cholamandalam Investment and are associated (or correlated) with Delta Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Manufacturing has no effect on the direction of Cholamandalam Investment i.e., Cholamandalam Investment and Delta Manufacturing go up and down completely randomly.

Pair Corralation between Cholamandalam Investment and Delta Manufacturing

Assuming the 90 days trading horizon Cholamandalam Investment is expected to generate 10.36 times less return on investment than Delta Manufacturing. But when comparing it to its historical volatility, Cholamandalam Investment and is 1.77 times less risky than Delta Manufacturing. It trades about 0.02 of its potential returns per unit of risk. Delta Manufacturing Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  9,206  in Delta Manufacturing Limited on October 7, 2024 and sell it today you would earn a total of  1,988  from holding Delta Manufacturing Limited or generate 21.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Cholamandalam Investment and  vs.  Delta Manufacturing Limited

Cholamandalam Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cholamandalam Investment and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Delta Manufacturing

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Manufacturing Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Delta Manufacturing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cholamandalam Investment and Delta Manufacturing

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

The idea behind Cholamandalam Investment and and Delta Manufacturing 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.