Correlation Between Cholamandalam Financial and Prudent Corporate

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

By analyzing existing cross correlation between Cholamandalam Financial Holdings and Prudent Corporate Advisory, you can compare the effects of market volatilities on Cholamandalam Financial and Prudent Corporate 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 Financial with a short position of Prudent Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cholamandalam Financial and Prudent Corporate.

Diversification Opportunities for Cholamandalam Financial and Prudent Corporate

-0.65

Correlation Coefficient

Cholamandalam Financial  Prudent Corporate

Excellent diversification

The 3 months correlation between Cholamandalam and Prudent is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cholamandalam Financial Holdin and Prudent Corporate Advisory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudent Corporate and Cholamandalam Financial 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 Financial Holdings are associated (or correlated) with Prudent Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudent Corporate has no effect on the direction of Cholamandalam Financial i.e., Cholamandalam Financial and Prudent Corporate go up and down completely randomly.

Pair Corralation between Cholamandalam Financial and Prudent Corporate

Assuming the 90 days trading horizon Cholamandalam Financial Holdings is expected to under-perform the Prudent Corporate. But the stock apears to be less risky and, when comparing its historical volatility, Cholamandalam Financial Holdings is 1.33 times less risky than Prudent Corporate. The stock trades about -0.09 of its potential returns per unit of risk. The Prudent Corporate Advisory is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  241,046  in Prudent Corporate Advisory on September 5, 2024 and sell it today you would earn a total of  59,299  from holding Prudent Corporate Advisory or generate 24.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Cholamandalam Financial Holdin  vs.  Prudent Corporate Advisory

Cholamandalam Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cholamandalam Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Prudent Corporate

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudent Corporate Advisory are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Prudent Corporate unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cholamandalam Financial and Prudent Corporate

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

The idea behind Cholamandalam Financial Holdings and Prudent Corporate Advisory 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.