Correlation Between Entertainment Network and Cholamandalam Investment

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

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

Diversification Opportunities for Entertainment Network and Cholamandalam Investment

0.86

Correlation Coefficient

Entertainment Network  Cholamandalam Investment

Very poor diversification

The 3 months correlation between Entertainment and Cholamandalam is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Entertainment Network Limited and Cholamandalam Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cholamandalam Investment and Entertainment Network 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 Entertainment Network Limited are associated (or correlated) with Cholamandalam Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cholamandalam Investment has no effect on the direction of Entertainment Network i.e., Entertainment Network and Cholamandalam Investment go up and down completely randomly.

Pair Corralation between Entertainment Network and Cholamandalam Investment

Assuming the 90 days trading horizon Entertainment Network Limited is expected to under-perform the Cholamandalam Investment. But the stock apears to be less risky and, when comparing its historical volatility, Entertainment Network Limited is 1.04 times less risky than Cholamandalam Investment. The stock trades about -0.13 of its potential returns per unit of risk. The Cholamandalam Investment and is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  151,610  in Cholamandalam Investment and on October 10, 2024 and sell it today you would lose (24,085) from holding Cholamandalam Investment and or give up 15.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Entertainment Network Limited  vs.  Cholamandalam Investment and

Entertainment Network

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entertainment Network Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Entertainment Network and Cholamandalam Investment

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

The idea behind Entertainment Network Limited and Cholamandalam Investment and 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.