Correlation Between GPT Healthcare and Tata Motors

Can any of the company-specific risk be diversified away by investing in both GPT Healthcare and Tata Motors 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 Motors 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 Motors Limited, you can compare the effects of market volatilities on GPT Healthcare and Tata Motors 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 Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of GPT Healthcare and Tata Motors.

Diversification Opportunities for GPT Healthcare and Tata Motors

0.9

Correlation Coefficient

GPT Healthcare  Tata Motors

Almost no diversification

The 3 months correlation between GPT and Tata is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding GPT Healthcare and Tata Motors Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Motors Limited 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 Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Motors Limited has no effect on the direction of GPT Healthcare i.e., GPT Healthcare and Tata Motors go up and down completely randomly.

Pair Corralation between GPT Healthcare and Tata Motors

Assuming the 90 days trading horizon GPT Healthcare is expected to under-perform the Tata Motors. In addition to that, GPT Healthcare is 1.04 times more volatile than Tata Motors Limited. It trades about -0.18 of its total potential returns per unit of risk. Tata Motors Limited is currently generating about -0.02 per unit of volatility. If you would invest  74,080  in Tata Motors Limited on December 26, 2024 and sell it today you would lose (3,050) from holding Tata Motors Limited or give up 4.12% of portfolio value over 90 days.

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

GPT Healthcare  vs.  Tata Motors Limited

GPT Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days GPT Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Tata Motors Limited

Risk-Adjusted Performance

Very Weak

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

Pair Trading with GPT Healthcare and Tata Motors

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

The idea behind GPT Healthcare and Tata Motors 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.