Correlation Between Tata Chemicals and GPT Healthcare

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

Diversification Opportunities for Tata Chemicals and GPT Healthcare

-0.12

Correlation Coefficient

Tata Chemicals  GPT Healthcare

Good diversification

The 3 months correlation between Tata and GPT is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Tata Chemicals Limited and GPT Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GPT Healthcare 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 GPT Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GPT Healthcare has no effect on the direction of Tata Chemicals i.e., Tata Chemicals and GPT Healthcare go up and down completely randomly.

Pair Corralation between Tata Chemicals and GPT Healthcare

Assuming the 90 days trading horizon Tata Chemicals Limited is expected to under-perform the GPT Healthcare. In addition to that, Tata Chemicals is 1.15 times more volatile than GPT Healthcare. It trades about -0.29 of its total potential returns per unit of risk. GPT Healthcare is currently generating about -0.2 per unit of volatility. If you would invest  18,807  in GPT Healthcare on October 14, 2024 and sell it today you would lose (1,173) from holding GPT Healthcare or give up 6.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Tata Chemicals Limited  vs.  GPT Healthcare

Tata Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Chemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

GPT Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GPT Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, GPT Healthcare is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Tata Chemicals and GPT Healthcare

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

The idea behind Tata Chemicals Limited and GPT Healthcare 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .