Correlation Between Edelweiss Financial and Cholamandalam Financial

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

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

Diversification Opportunities for Edelweiss Financial and Cholamandalam Financial

-0.44

Correlation Coefficient

Edelweiss Financial  Cholamandalam Financial

Very good diversification

The 3 months correlation between Edelweiss and Cholamandalam is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Edelweiss Financial Services and Cholamandalam Financial Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cholamandalam Financial and Edelweiss 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 Edelweiss Financial Services are associated (or correlated) with Cholamandalam Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cholamandalam Financial has no effect on the direction of Edelweiss Financial i.e., Edelweiss Financial and Cholamandalam Financial go up and down completely randomly.

Pair Corralation between Edelweiss Financial and Cholamandalam Financial

Assuming the 90 days trading horizon Edelweiss Financial Services is expected to generate 2.63 times more return on investment than Cholamandalam Financial. However, Edelweiss Financial is 2.63 times more volatile than Cholamandalam Financial Holdings. It trades about 0.07 of its potential returns per unit of risk. Cholamandalam Financial Holdings is currently generating about 0.09 per unit of risk. If you would invest  3,381  in Edelweiss Financial Services on October 25, 2024 and sell it today you would earn a total of  7,754  from holding Edelweiss Financial Services or generate 229.34% return on investment over 90 days.

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

Edelweiss Financial Services  vs.  Cholamandalam Financial Holdin

Edelweiss Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Edelweiss Financial Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, Edelweiss Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 conflicting 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.

Pair Trading with Edelweiss Financial and Cholamandalam Financial

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

The idea behind Edelweiss Financial Services and Cholamandalam Financial Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.