Correlation Between Next Mediaworks and Tilaknagar Industries

Can any of the company-specific risk be diversified away by investing in both Next Mediaworks and Tilaknagar Industries 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 Next Mediaworks and Tilaknagar Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Next Mediaworks and Tilaknagar Industries

0.59

Correlation Coefficient

Next Mediaworks  Tilaknagar Industries

Very weak diversification

The 3 months correlation between Next and Tilaknagar is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Next Mediaworks Limited and Tilaknagar Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tilaknagar Industries and Next Mediaworks 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 Next Mediaworks Limited are associated (or correlated) with Tilaknagar Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tilaknagar Industries has no effect on the direction of Next Mediaworks i.e., Next Mediaworks and Tilaknagar Industries go up and down completely randomly.

Pair Corralation between Next Mediaworks and Tilaknagar Industries

Assuming the 90 days trading horizon Next Mediaworks is expected to generate 2.85 times less return on investment than Tilaknagar Industries. In addition to that, Next Mediaworks is 1.32 times more volatile than Tilaknagar Industries Limited. It trades about 0.05 of its total potential returns per unit of risk. Tilaknagar Industries Limited is currently generating about 0.17 per unit of volatility. If you would invest  29,005  in Tilaknagar Industries Limited on October 20, 2024 and sell it today you would earn a total of  11,890  from holding Tilaknagar Industries Limited or generate 40.99% return on investment over 90 days.

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

Next Mediaworks Limited  vs.  Tilaknagar Industries Limited

Next Mediaworks

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Next Mediaworks Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, Next Mediaworks exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tilaknagar Industries

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tilaknagar Industries Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Tilaknagar Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Next Mediaworks and Tilaknagar Industries

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

The idea behind Next Mediaworks Limited and Tilaknagar Industries 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 Global Correlations module to find global opportunities by holding instruments from different markets.