Correlation Between GM Breweries and Tata Investment

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

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

Diversification Opportunities for GM Breweries and Tata Investment

0.33

Correlation Coefficient

GM Breweries  Tata Investment

Weak diversification

The 3 months correlation between GMBREW and Tata is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and Tata Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Investment and GM Breweries 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 GM Breweries Limited are associated (or correlated) with Tata Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Investment has no effect on the direction of GM Breweries i.e., GM Breweries and Tata Investment go up and down completely randomly.

Pair Corralation between GM Breweries and Tata Investment

Assuming the 90 days trading horizon GM Breweries is expected to generate 1.65 times less return on investment than Tata Investment. In addition to that, GM Breweries is 1.26 times more volatile than Tata Investment. It trades about 0.04 of its total potential returns per unit of risk. Tata Investment is currently generating about 0.09 per unit of volatility. If you would invest  218,206  in Tata Investment on October 12, 2024 and sell it today you would earn a total of  421,924  from holding Tata Investment or generate 193.36% return on investment over 90 days.

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

GM Breweries Limited  vs.  Tata Investment

GM Breweries Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GM Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GM Breweries is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tata Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with GM Breweries and Tata Investment

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

The idea behind GM Breweries Limited and Tata Investment 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.