Correlation Between Tata Investment and Hindustan Media

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

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

Diversification Opportunities for Tata Investment and Hindustan Media

0.72

Correlation Coefficient

Tata Investment  Hindustan Media

Poor diversification

The 3 months correlation between Tata and Hindustan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Tata Investment and Hindustan Media Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindustan Media Ventures 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 Hindustan Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindustan Media Ventures has no effect on the direction of Tata Investment i.e., Tata Investment and Hindustan Media go up and down completely randomly.

Pair Corralation between Tata Investment and Hindustan Media

Assuming the 90 days trading horizon Tata Investment is expected to generate 0.74 times more return on investment than Hindustan Media. However, Tata Investment is 1.36 times less risky than Hindustan Media. It trades about -0.02 of its potential returns per unit of risk. Hindustan Media Ventures is currently generating about -0.02 per unit of risk. If you would invest  675,040  in Tata Investment on December 28, 2024 and sell it today you would lose (41,880) from holding Tata Investment or give up 6.2% of portfolio value over 90 days.

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

Tata Investment  vs.  Hindustan Media Ventures

Tata Investment

Risk-Adjusted Performance

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.

Hindustan Media Ventures

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hindustan Media Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hindustan Media is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Tata Investment and Hindustan Media

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

The idea behind Tata Investment and Hindustan Media Ventures 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.