Correlation Between Taj GVK and United Drilling

Can any of the company-specific risk be diversified away by investing in both Taj GVK and United Drilling 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 United Drilling 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 United Drilling Tools, you can compare the effects of market volatilities on Taj GVK and United Drilling 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 United Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taj GVK and United Drilling.

Diversification Opportunities for Taj GVK and United Drilling

-0.63

Correlation Coefficient

Taj GVK  United Drilling

Excellent diversification

The 3 months correlation between Taj and United is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Taj GVK Hotels and United Drilling Tools in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Drilling Tools 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 United Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Drilling Tools has no effect on the direction of Taj GVK i.e., Taj GVK and United Drilling go up and down completely randomly.

Pair Corralation between Taj GVK and United Drilling

Assuming the 90 days trading horizon Taj GVK Hotels is expected to generate 1.92 times more return on investment than United Drilling. However, Taj GVK is 1.92 times more volatile than United Drilling Tools. It trades about 0.14 of its potential returns per unit of risk. United Drilling Tools is currently generating about -0.1 per unit of risk. If you would invest  35,380  in Taj GVK Hotels on December 24, 2024 and sell it today you would earn a total of  15,960  from holding Taj GVK Hotels or generate 45.11% return on investment over 90 days.

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

Taj GVK Hotels  vs.  United Drilling Tools

Taj GVK Hotels

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Taj GVK Hotels are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Taj GVK sustained solid returns over the last few months and may actually be approaching a breakup point.

United Drilling Tools

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Drilling Tools has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Taj GVK and United Drilling

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

The idea behind Taj GVK Hotels and United Drilling Tools 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.