Correlation Between Spencers Retail and Tamilnad Mercantile

Can any of the company-specific risk be diversified away by investing in both Spencers Retail and Tamilnad Mercantile 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 Spencers Retail and Tamilnad Mercantile into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Spencers Retail Limited and Tamilnad Mercantile Bank, you can compare the effects of market volatilities on Spencers Retail and Tamilnad Mercantile 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 Spencers Retail with a short position of Tamilnad Mercantile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spencers Retail and Tamilnad Mercantile.

Diversification Opportunities for Spencers Retail and Tamilnad Mercantile

0.12

Correlation Coefficient

Spencers Retail  Tamilnad Mercantile

Average diversification

The 3 months correlation between Spencers and Tamilnad is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Spencers Retail Limited and Tamilnad Mercantile Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tamilnad Mercantile Bank and Spencers Retail 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 Spencers Retail Limited are associated (or correlated) with Tamilnad Mercantile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tamilnad Mercantile Bank has no effect on the direction of Spencers Retail i.e., Spencers Retail and Tamilnad Mercantile go up and down completely randomly.

Pair Corralation between Spencers Retail and Tamilnad Mercantile

Assuming the 90 days trading horizon Spencers Retail Limited is expected to under-perform the Tamilnad Mercantile. In addition to that, Spencers Retail is 1.23 times more volatile than Tamilnad Mercantile Bank. It trades about -0.05 of its total potential returns per unit of risk. Tamilnad Mercantile Bank is currently generating about 0.13 per unit of volatility. If you would invest  44,345  in Tamilnad Mercantile Bank on September 25, 2024 and sell it today you would earn a total of  1,775  from holding Tamilnad Mercantile Bank or generate 4.0% return on investment over 90 days.

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

Spencers Retail Limited  vs.  Tamilnad Mercantile Bank

Spencers Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spencers Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Tamilnad Mercantile Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Spencers Retail and Tamilnad Mercantile

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

The idea behind Spencers Retail Limited and Tamilnad Mercantile Bank 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.