Correlation Between Taj GVK and Wipro

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

Diversification Opportunities for Taj GVK and Wipro

0.08

Correlation Coefficient

Taj GVK  Wipro

Significant diversification

The 3 months correlation between Taj and Wipro is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Taj GVK Hotels and Wipro Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wipro Limited 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 Wipro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wipro Limited has no effect on the direction of Taj GVK i.e., Taj GVK and Wipro go up and down completely randomly.

Pair Corralation between Taj GVK and Wipro

Assuming the 90 days trading horizon Taj GVK is expected to generate 3.92 times less return on investment than Wipro. But when comparing it to its historical volatility, Taj GVK Hotels is 4.51 times less risky than Wipro. It trades about 0.07 of its potential returns per unit of risk. Wipro Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  20,274  in Wipro Limited on October 25, 2024 and sell it today you would earn a total of  11,496  from holding Wipro Limited or generate 56.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.39%
Values	Daily Returns

Taj GVK Hotels  vs.  Wipro Limited

Taj GVK Hotels

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taj GVK Hotels are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Taj GVK sustained solid returns over the last few months and may actually be approaching a breakup point.

Wipro Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wipro Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Wipro displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taj GVK and Wipro

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

The idea behind Taj GVK Hotels and Wipro 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.