Correlation Between Tata Investment and Eros International

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

By analyzing existing cross correlation between Tata Investment and Eros International Media, you can compare the effects of market volatilities on Tata Investment and Eros International 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 Eros International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Investment and Eros International.

Diversification Opportunities for Tata Investment and Eros International

0.16

Correlation Coefficient

Tata Investment  Eros International

Average diversification

The 3 months correlation between Tata and Eros is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Tata Investment and Eros International Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eros International Media 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 Eros International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eros International Media has no effect on the direction of Tata Investment i.e., Tata Investment and Eros International go up and down completely randomly.

Pair Corralation between Tata Investment and Eros International

Assuming the 90 days trading horizon Tata Investment is expected to generate 400.5 times less return on investment than Eros International. But when comparing it to its historical volatility, Tata Investment is 1.94 times less risky than Eros International. It trades about 0.0 of its potential returns per unit of risk. Eros International Media is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,498  in Eros International Media on September 21, 2024 and sell it today you would earn a total of  20.00  from holding Eros International Media or generate 1.34% return on investment over 90 days.

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

Tata Investment  vs.  Eros International Media

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 fairly stable technical and fundamental indicators, Tata Investment is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Eros International Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eros International Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Tata Investment and Eros International

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

The idea behind Tata Investment and Eros International Media 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.