Correlation Between Global Health and Tata Communications

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

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

Diversification Opportunities for Global Health and Tata Communications

-0.64

Correlation Coefficient

Global Health  Tata Communications

Excellent diversification

The 3 months correlation between Global and Tata is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Global Health Limited and Tata Communications Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Communications and Global Health 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 Global Health Limited 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 Global Health i.e., Global Health and Tata Communications go up and down completely randomly.

Pair Corralation between Global Health and Tata Communications

Assuming the 90 days trading horizon Global Health Limited is expected to under-perform the Tata Communications. But the stock apears to be less risky and, when comparing its historical volatility, Global Health Limited is 1.05 times less risky than Tata Communications. The stock trades about -0.27 of its potential returns per unit of risk. The Tata Communications Limited is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  179,250  in Tata Communications Limited on October 7, 2024 and sell it today you would lose (5,595) from holding Tata Communications Limited or give up 3.12% of portfolio value over 90 days.

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

Global Health Limited  vs.  Tata Communications Limited

Global Health Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Health Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Global Health sustained solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Global Health and Tata Communications

The main advantage of trading using opposite Global Health and Tata Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Health 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 Global Health Limited 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.