Correlation Between Cholamandalam Investment and Tarapur Transformers

Can any of the company-specific risk be diversified away by investing in both Cholamandalam Investment and Tarapur Transformers 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 Tarapur Transformers 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 Tarapur Transformers Limited, you can compare the effects of market volatilities on Cholamandalam Investment and Tarapur Transformers 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 Tarapur Transformers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cholamandalam Investment and Tarapur Transformers.

Diversification Opportunities for Cholamandalam Investment and Tarapur Transformers

-0.04

Correlation Coefficient

Cholamandalam Investment  Tarapur Transformers

Good diversification

The 3 months correlation between Cholamandalam and Tarapur is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Cholamandalam Investment and and Tarapur Transformers Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarapur Transformers 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 Tarapur Transformers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tarapur Transformers has no effect on the direction of Cholamandalam Investment i.e., Cholamandalam Investment and Tarapur Transformers go up and down completely randomly.

Pair Corralation between Cholamandalam Investment and Tarapur Transformers

Assuming the 90 days trading horizon Cholamandalam Investment is expected to generate 4.35 times less return on investment than Tarapur Transformers. But when comparing it to its historical volatility, Cholamandalam Investment and is 1.66 times less risky than Tarapur Transformers. It trades about 0.06 of its potential returns per unit of risk. Tarapur Transformers Limited is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  400.00  in Tarapur Transformers Limited on October 23, 2024 and sell it today you would earn a total of  3,789  from holding Tarapur Transformers Limited or generate 947.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

Cholamandalam Investment and  vs.  Tarapur Transformers 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 conflicting 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.

Tarapur Transformers

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tarapur Transformers Limited are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Tarapur Transformers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cholamandalam Investment and Tarapur Transformers

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

The idea behind Cholamandalam Investment and and Tarapur Transformers 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.