Correlation Between SBI Cards and Tera Software

Can any of the company-specific risk be diversified away by investing in both SBI Cards and Tera Software 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 SBI Cards and Tera Software into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for SBI Cards and Tera Software

-0.31

Correlation Coefficient

SBI Cards  Tera Software

Very good diversification

The 3 months correlation between SBI and Tera is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding SBI Cards and and Tera Software Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tera Software Limited and SBI Cards 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 SBI Cards and are associated (or correlated) with Tera Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tera Software Limited has no effect on the direction of SBI Cards i.e., SBI Cards and Tera Software go up and down completely randomly.

Pair Corralation between SBI Cards and Tera Software

Assuming the 90 days trading horizon SBI Cards is expected to generate 10.46 times less return on investment than Tera Software. But when comparing it to its historical volatility, SBI Cards and is 2.42 times less risky than Tera Software. It trades about 0.08 of its potential returns per unit of risk. Tera Software Limited is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  11,658  in Tera Software Limited on October 9, 2024 and sell it today you would earn a total of  7,053  from holding Tera Software Limited or generate 60.5% return on investment over 90 days.

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

SBI Cards and  vs.  Tera Software Limited

SBI Cards

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBI Cards and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SBI Cards is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Tera Software Limited

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tera Software Limited are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Tera Software reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBI Cards and Tera Software

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

The idea behind SBI Cards and and Tera Software 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.