Correlation Between GPT Healthcare and Tata Communications

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

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

Diversification Opportunities for GPT Healthcare and Tata Communications

0.56

Correlation Coefficient

GPT Healthcare  Tata Communications

Very weak diversification

The 3 months correlation between GPT and Tata is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding GPT Healthcare and Tata Communications Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Communications and GPT Healthcare 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 GPT Healthcare are associated (or correlated) with Tata Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Communications has no effect on the direction of GPT Healthcare i.e., GPT Healthcare and Tata Communications go up and down completely randomly.

Pair Corralation between GPT Healthcare and Tata Communications

Assuming the 90 days trading horizon GPT Healthcare is expected to generate 1.02 times more return on investment than Tata Communications. However, GPT Healthcare is 1.02 times more volatile than Tata Communications Limited. It trades about -0.01 of its potential returns per unit of risk. Tata Communications Limited is currently generating about -0.08 per unit of risk. If you would invest  18,891  in GPT Healthcare on September 14, 2024 and sell it today you would lose (448.00) from holding GPT Healthcare or give up 2.37% of portfolio value over 90 days.

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

GPT Healthcare  vs.  Tata Communications Limited

GPT Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GPT Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, GPT Healthcare is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Tata Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Communications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with GPT Healthcare and Tata Communications

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

The idea behind GPT Healthcare and Tata Communications 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.