Correlation Between Eros International and Data Patterns

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

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

Diversification Opportunities for Eros International and Data Patterns

0.18

Correlation Coefficient

Eros International  Data Patterns

Average diversification

The 3 months correlation between Eros and Data is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Eros International Media and Data Patterns Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data Patterns Limited and Eros International 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 Eros International Media are associated (or correlated) with Data Patterns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data Patterns Limited has no effect on the direction of Eros International i.e., Eros International and Data Patterns go up and down completely randomly.

Pair Corralation between Eros International and Data Patterns

Assuming the 90 days trading horizon Eros International Media is expected to under-perform the Data Patterns. But the stock apears to be less risky and, when comparing its historical volatility, Eros International Media is 1.43 times less risky than Data Patterns. The stock trades about -0.19 of its potential returns per unit of risk. The Data Patterns Limited is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  219,190  in Data Patterns Limited on October 27, 2024 and sell it today you would lose (8,555) from holding Data Patterns Limited or give up 3.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Eros International Media  vs.  Data Patterns Limited

Eros International Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eros International Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Data Patterns Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Data Patterns Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Data Patterns is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Eros International and Data Patterns

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

The idea behind Eros International Media and Data Patterns 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.