Correlation Between Tata Investment and Cholamandalam Financial

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

By analyzing existing cross correlation between Tata Investment and Cholamandalam Financial Holdings, you can compare the effects of market volatilities on Tata Investment and Cholamandalam Financial 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 Investment with a short position of Cholamandalam Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Investment and Cholamandalam Financial.

Diversification Opportunities for Tata Investment and Cholamandalam Financial

0.33

Correlation Coefficient

Tata Investment  Cholamandalam Financial

Weak diversification

The 3 months correlation between Tata and Cholamandalam is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Tata Investment and Cholamandalam Financial Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cholamandalam Financial and Tata Investment 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 Investment are associated (or correlated) with Cholamandalam Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cholamandalam Financial has no effect on the direction of Tata Investment i.e., Tata Investment and Cholamandalam Financial go up and down completely randomly.

Pair Corralation between Tata Investment and Cholamandalam Financial

Assuming the 90 days trading horizon Tata Investment is expected to generate 0.64 times more return on investment than Cholamandalam Financial. However, Tata Investment is 1.57 times less risky than Cholamandalam Financial. It trades about -0.07 of its potential returns per unit of risk. Cholamandalam Financial Holdings is currently generating about -0.19 per unit of risk. If you would invest  679,340  in Tata Investment on October 22, 2024 and sell it today you would lose (47,030) from holding Tata Investment or give up 6.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Tata Investment  vs.  Cholamandalam Financial Holdin

Tata Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Cholamandalam Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cholamandalam Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Tata Investment and Cholamandalam Financial

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

The idea behind Tata Investment and Cholamandalam Financial Holdings 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.