Correlation Between Taj GVK and Piramal Enterprises

Can any of the company-specific risk be diversified away by investing in both Taj GVK and Piramal Enterprises 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 Taj GVK and Piramal Enterprises into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Taj GVK Hotels and Piramal Enterprises Limited, you can compare the effects of market volatilities on Taj GVK and Piramal Enterprises 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 Taj GVK with a short position of Piramal Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taj GVK and Piramal Enterprises.

Diversification Opportunities for Taj GVK and Piramal Enterprises

-0.41

Correlation Coefficient

Taj GVK  Piramal Enterprises

Very good diversification

The 3 months correlation between Taj and Piramal is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Taj GVK Hotels and Piramal Enterprises Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piramal Enterprises and Taj GVK 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 Taj GVK Hotels are associated (or correlated) with Piramal Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piramal Enterprises has no effect on the direction of Taj GVK i.e., Taj GVK and Piramal Enterprises go up and down completely randomly.

Pair Corralation between Taj GVK and Piramal Enterprises

Assuming the 90 days trading horizon Taj GVK Hotels is expected to generate 2.02 times more return on investment than Piramal Enterprises. However, Taj GVK is 2.02 times more volatile than Piramal Enterprises Limited. It trades about 0.12 of its potential returns per unit of risk. Piramal Enterprises Limited is currently generating about -0.15 per unit of risk. If you would invest  34,205  in Taj GVK Hotels on November 28, 2024 and sell it today you would earn a total of  12,015  from holding Taj GVK Hotels or generate 35.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Taj GVK Hotels  vs.  Piramal Enterprises Limited

Taj GVK Hotels

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taj GVK Hotels are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Taj GVK sustained solid returns over the last few months and may actually be approaching a breakup point.

Piramal Enterprises

Risk-Adjusted Performance

Very Weak

Over the last 90 days Piramal Enterprises Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Taj GVK and Piramal Enterprises

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

The idea behind Taj GVK Hotels and Piramal Enterprises 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.