Correlation Between TATA SUMER and Foods Inns

Can any of the company-specific risk be diversified away by investing in both TATA SUMER and Foods Inns 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 SUMER and Foods Inns into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TATA SUMER PRODUCTS and Foods Inns Limited, you can compare the effects of market volatilities on TATA SUMER and Foods Inns 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 SUMER with a short position of Foods Inns. Check out your portfolio center. Please also check ongoing floating volatility patterns of TATA SUMER and Foods Inns.

Diversification Opportunities for TATA SUMER and Foods Inns

-0.78

Correlation Coefficient

TATA SUMER  Foods Inns

Pay attention - limited upside

The 3 months correlation between TATA and Foods is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding TATA SUMER PRODUCTS and Foods Inns Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foods Inns Limited and TATA SUMER 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 SUMER PRODUCTS are associated (or correlated) with Foods Inns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foods Inns Limited has no effect on the direction of TATA SUMER i.e., TATA SUMER and Foods Inns go up and down completely randomly.

Pair Corralation between TATA SUMER and Foods Inns

Assuming the 90 days trading horizon TATA SUMER PRODUCTS is expected to generate 0.41 times more return on investment than Foods Inns. However, TATA SUMER PRODUCTS is 2.46 times less risky than Foods Inns. It trades about 0.06 of its potential returns per unit of risk. Foods Inns Limited is currently generating about -0.07 per unit of risk. If you would invest  95,865  in TATA SUMER PRODUCTS on November 29, 2024 and sell it today you would earn a total of  4,620  from holding TATA SUMER PRODUCTS or generate 4.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

TATA SUMER PRODUCTS  vs.  Foods Inns Limited

TATA SUMER PRODUCTS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TATA SUMER PRODUCTS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, TATA SUMER is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Foods Inns Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Foods Inns Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with TATA SUMER and Foods Inns

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

The idea behind TATA SUMER PRODUCTS and Foods Inns 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.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.