Correlation Between Tata Chemicals and Cantabil Retail

Can any of the company-specific risk be diversified away by investing in both Tata Chemicals and Cantabil Retail 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 Tata Chemicals and Cantabil Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tata Chemicals Limited and Cantabil Retail India, you can compare the effects of market volatilities on Tata Chemicals and Cantabil Retail 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 Tata Chemicals with a short position of Cantabil Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Chemicals and Cantabil Retail.

Diversification Opportunities for Tata Chemicals and Cantabil Retail

-0.29

Correlation Coefficient

Tata Chemicals  Cantabil Retail

Very good diversification

The 3 months correlation between Tata and Cantabil is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Tata Chemicals Limited and Cantabil Retail India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cantabil Retail India and Tata Chemicals 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 Tata Chemicals Limited are associated (or correlated) with Cantabil Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cantabil Retail India has no effect on the direction of Tata Chemicals i.e., Tata Chemicals and Cantabil Retail go up and down completely randomly.

Pair Corralation between Tata Chemicals and Cantabil Retail

Assuming the 90 days trading horizon Tata Chemicals Limited is expected to under-perform the Cantabil Retail. But the stock apears to be less risky and, when comparing its historical volatility, Tata Chemicals Limited is 1.72 times less risky than Cantabil Retail. The stock trades about -0.04 of its potential returns per unit of risk. The Cantabil Retail India is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  22,722  in Cantabil Retail India on September 25, 2024 and sell it today you would earn a total of  4,030  from holding Cantabil Retail India or generate 17.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Tata Chemicals Limited  vs.  Cantabil Retail India

Tata Chemicals

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tata Chemicals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Tata Chemicals is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Cantabil Retail India

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cantabil Retail India are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental drivers, Cantabil Retail may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tata Chemicals and Cantabil Retail

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

The idea behind Tata Chemicals Limited and Cantabil Retail India 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.