Correlation Between Diligent Media and TVS Electronics

Can any of the company-specific risk be diversified away by investing in both Diligent Media and TVS Electronics 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 Diligent Media and TVS Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Diligent Media and TVS Electronics

0.54

Correlation Coefficient

Diligent Media  TVS Electronics

Very weak diversification

The 3 months correlation between Diligent and TVS is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Diligent Media and TVS Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TVS Electronics and Diligent Media 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 Diligent Media are associated (or correlated) with TVS Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TVS Electronics has no effect on the direction of Diligent Media i.e., Diligent Media and TVS Electronics go up and down completely randomly.

Pair Corralation between Diligent Media and TVS Electronics

Assuming the 90 days trading horizon Diligent Media is expected to generate 1.66 times more return on investment than TVS Electronics. However, Diligent Media is 1.66 times more volatile than TVS Electronics Limited. It trades about 0.06 of its potential returns per unit of risk. TVS Electronics Limited is currently generating about -0.04 per unit of risk. If you would invest  501.00  in Diligent Media on November 29, 2024 and sell it today you would earn a total of  55.00  from holding Diligent Media or generate 10.98% return on investment over 90 days.

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

Diligent Media  vs.  TVS Electronics Limited

Diligent Media

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diligent Media are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Diligent Media demonstrated solid returns over the last few months and may actually be approaching a breakup point.

TVS Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days TVS Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Diligent Media and TVS Electronics

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

The idea behind Diligent Media and TVS Electronics 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.