Correlation Between Federal Bank and Cholamandalam Investment

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

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

Diversification Opportunities for Federal Bank and Cholamandalam Investment

-0.56

Correlation Coefficient

Federal Bank  Cholamandalam Investment

Excellent diversification

The 3 months correlation between Federal and Cholamandalam is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding The Federal Bank and Cholamandalam Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cholamandalam Investment and Federal Bank 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 The Federal Bank 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 Federal Bank i.e., Federal Bank and Cholamandalam Investment go up and down completely randomly.

Pair Corralation between Federal Bank and Cholamandalam Investment

Assuming the 90 days trading horizon The Federal Bank is expected to under-perform the Cholamandalam Investment. But the stock apears to be less risky and, when comparing its historical volatility, The Federal Bank is 1.29 times less risky than Cholamandalam Investment. The stock trades about -0.23 of its potential returns per unit of risk. The Cholamandalam Investment and is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  133,985  in Cholamandalam Investment and on October 11, 2024 and sell it today you would lose (5,165) from holding Cholamandalam Investment and or give up 3.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

The Federal Bank  vs.  Cholamandalam Investment and

Federal Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Federal Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Federal Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional 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 unfluctuating 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 Federal Bank and Cholamandalam Investment

The main advantage of trading using opposite Federal Bank and Cholamandalam Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Bank 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 The Federal Bank 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.