Correlation Between Tata Investment and Hybrid Financial

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

Diversification Opportunities for Tata Investment and Hybrid Financial

0.3

Correlation Coefficient

Tata Investment  Hybrid Financial

Weak diversification

The 3 months correlation between Tata and Hybrid is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Tata Investment and Hybrid Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hybrid Financial Services 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 Hybrid Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hybrid Financial Services has no effect on the direction of Tata Investment i.e., Tata Investment and Hybrid Financial go up and down completely randomly.

Pair Corralation between Tata Investment and Hybrid Financial

Assuming the 90 days trading horizon Tata Investment is expected to under-perform the Hybrid Financial. But the stock apears to be less risky and, when comparing its historical volatility, Tata Investment is 1.62 times less risky than Hybrid Financial. The stock trades about -0.22 of its potential returns per unit of risk. The Hybrid Financial Services is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,299  in Hybrid Financial Services on November 20, 2024 and sell it today you would lose (154.00) from holding Hybrid Financial Services or give up 11.86% of portfolio value over 90 days.

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

Tata Investment  vs.  Hybrid Financial Services

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in March 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Hybrid Financial Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hybrid Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Tata Investment and Hybrid Financial

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

The idea behind Tata Investment and Hybrid Financial Services 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.