Correlation Between Kalyani Investment and Tata Consultancy

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

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

Diversification Opportunities for Kalyani Investment and Tata Consultancy

0.82

Correlation Coefficient

Kalyani Investment  Tata Consultancy

Very poor diversification

The 3 months correlation between Kalyani and Tata is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Kalyani Investment and Tata Consultancy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Consultancy Services and Kalyani Investment 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 Kalyani Investment are associated (or correlated) with Tata Consultancy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Consultancy Services has no effect on the direction of Kalyani Investment i.e., Kalyani Investment and Tata Consultancy go up and down completely randomly.

Pair Corralation between Kalyani Investment and Tata Consultancy

Assuming the 90 days trading horizon Kalyani Investment is expected to under-perform the Tata Consultancy. In addition to that, Kalyani Investment is 2.19 times more volatile than Tata Consultancy Services. It trades about -0.15 of its total potential returns per unit of risk. Tata Consultancy Services is currently generating about -0.14 per unit of volatility. If you would invest  408,317  in Tata Consultancy Services on December 23, 2024 and sell it today you would lose (50,507) from holding Tata Consultancy Services or give up 12.37% of portfolio value over 90 days.

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

Kalyani Investment  vs.  Tata Consultancy Services

Kalyani Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kalyani Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Tata Consultancy Services

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Kalyani Investment and Tata Consultancy

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

The idea behind Kalyani Investment and Tata Consultancy Services 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.