Correlation Between Sportking India and Tata Communications

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

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

Diversification Opportunities for Sportking India and Tata Communications

0.53

Correlation Coefficient

Sportking India  Tata Communications

Very weak diversification

The 3 months correlation between Sportking and Tata is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sportking India 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 Sportking India 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 Sportking India 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 Sportking India i.e., Sportking India and Tata Communications go up and down completely randomly.

Pair Corralation between Sportking India and Tata Communications

Assuming the 90 days trading horizon Sportking India Limited is expected to generate 2.06 times more return on investment than Tata Communications. However, Sportking India is 2.06 times more volatile than Tata Communications Limited. It trades about 0.15 of its potential returns per unit of risk. Tata Communications Limited is currently generating about -0.05 per unit of risk. If you would invest  9,794  in Sportking India Limited on September 29, 2024 and sell it today you would earn a total of  893.00  from holding Sportking India Limited or generate 9.12% return on investment over 90 days.

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

Sportking India Limited  vs.  Tata Communications Limited

Sportking India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sportking India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Sportking India is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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

Pair Trading with Sportking India and Tata Communications

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

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.