Correlation Between Tarapur Transformers and 360 ONE

Can any of the company-specific risk be diversified away by investing in both Tarapur Transformers and 360 ONE 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 Tarapur Transformers and 360 ONE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tarapur Transformers Limited and 360 ONE WAM, you can compare the effects of market volatilities on Tarapur Transformers and 360 ONE 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 Tarapur Transformers with a short position of 360 ONE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tarapur Transformers and 360 ONE.

Diversification Opportunities for Tarapur Transformers and 360 ONE

0.81

Correlation Coefficient

Tarapur Transformers  360 ONE

Very poor diversification

The 3 months correlation between Tarapur and 360 is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Tarapur Transformers Limited and 360 ONE WAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 360 ONE WAM and Tarapur Transformers 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 Tarapur Transformers Limited are associated (or correlated) with 360 ONE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 360 ONE WAM has no effect on the direction of Tarapur Transformers i.e., Tarapur Transformers and 360 ONE go up and down completely randomly.

Pair Corralation between Tarapur Transformers and 360 ONE

Assuming the 90 days trading horizon Tarapur Transformers Limited is expected to generate 1.46 times more return on investment than 360 ONE. However, Tarapur Transformers is 1.46 times more volatile than 360 ONE WAM. It trades about 0.16 of its potential returns per unit of risk. 360 ONE WAM is currently generating about 0.11 per unit of risk. If you would invest  440.00  in Tarapur Transformers Limited on September 23, 2024 and sell it today you would earn a total of  4,109  from holding Tarapur Transformers Limited or generate 933.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Tarapur Transformers Limited  vs.  360 ONE WAM

Tarapur Transformers

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Tarapur Transformers Limited are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Tarapur Transformers reported solid returns over the last few months and may actually be approaching a breakup point.

360 ONE WAM

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 360 ONE WAM are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, 360 ONE sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tarapur Transformers and 360 ONE

The main advantage of trading using opposite Tarapur Transformers and 360 ONE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tarapur Transformers position performs unexpectedly, 360 ONE 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 360 ONE will offset losses from the drop in 360 ONE's long position.

The idea behind Tarapur Transformers Limited and 360 ONE WAM 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.