Correlation Between Tarapur Transformers and Total Transport

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

Diversification Opportunities for Tarapur Transformers and Total Transport

-0.63

Correlation Coefficient

Tarapur Transformers  Total Transport

Excellent diversification

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

Pair Corralation between Tarapur Transformers and Total Transport

Assuming the 90 days trading horizon Tarapur Transformers Limited is expected to generate 1.12 times more return on investment than Total Transport. However, Tarapur Transformers is 1.12 times more volatile than Total Transport Systems. It trades about 0.69 of its potential returns per unit of risk. Total Transport Systems is currently generating about 0.25 per unit of risk. If you would invest  2,999  in Tarapur Transformers Limited on September 24, 2024 and sell it today you would earn a total of  1,459  from holding Tarapur Transformers Limited or generate 48.65% return on investment over 90 days.

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

Tarapur Transformers Limited  vs.  Total Transport Systems

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 unfluctuating basic indicators, Tarapur Transformers reported solid returns over the last few months and may actually be approaching a breakup point.

Total Transport Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Total Transport Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting 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 Tarapur Transformers and Total Transport

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

The idea behind Tarapur Transformers Limited and Total Transport Systems 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.