Correlation Between Cholamandalam Financial and Tata Investment

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

Diversification Opportunities for Cholamandalam Financial and Tata Investment

0.17

Correlation Coefficient

Cholamandalam Financial  Tata Investment

Average diversification

The 3 months correlation between Cholamandalam and Tata is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Cholamandalam Financial Holdin and Tata Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Investment 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 Tata Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Investment has no effect on the direction of Cholamandalam Financial i.e., Cholamandalam Financial and Tata Investment go up and down completely randomly.

Pair Corralation between Cholamandalam Financial and Tata Investment

Assuming the 90 days trading horizon Cholamandalam Financial Holdings is expected to under-perform the Tata Investment. In addition to that, Cholamandalam Financial is 1.84 times more volatile than Tata Investment. It trades about -0.11 of its total potential returns per unit of risk. Tata Investment is currently generating about 0.06 per unit of volatility. If you would invest  668,880  in Tata Investment on October 6, 2024 and sell it today you would earn a total of  20,150  from holding Tata Investment or generate 3.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Cholamandalam Financial Holdin  vs.  Tata Investment

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 unfluctuating performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Tata Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tata Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Tata Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cholamandalam Financial and Tata Investment

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

The idea behind Cholamandalam Financial Holdings and Tata Investment 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.