Correlation Between Tata Investment and Network18 Media

Can any of the company-specific risk be diversified away by investing in both Tata Investment and Network18 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 Network18 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 Network18 Media Investments, you can compare the effects of market volatilities on Tata Investment and Network18 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 Network18 Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Investment and Network18 Media.

Diversification Opportunities for Tata Investment and Network18 Media

0.31

Correlation Coefficient

Tata Investment  Network18 Media

Weak diversification

The 3 months correlation between Tata and Network18 is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Tata Investment and Network18 Media Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Network18 Media Inve 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 Network18 Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Network18 Media Inve has no effect on the direction of Tata Investment i.e., Tata Investment and Network18 Media go up and down completely randomly.

Pair Corralation between Tata Investment and Network18 Media

Assuming the 90 days trading horizon Tata Investment is expected to generate 0.54 times more return on investment than Network18 Media. However, Tata Investment is 1.85 times less risky than Network18 Media. It trades about 0.01 of its potential returns per unit of risk. Network18 Media Investments is currently generating about -0.09 per unit of risk. If you would invest  687,735  in Tata Investment on September 14, 2024 and sell it today you would lose (250.00) from holding Tata Investment or give up 0.04% 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.  Network18 Media Investments

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.

Network18 Media Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Network18 Media Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 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 Network18 Media

The main advantage of trading using opposite Tata Investment and Network18 Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tata Investment position performs unexpectedly, Network18 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 Network18 Media will offset losses from the drop in Network18 Media's long position.

The idea behind Tata Investment and Network18 Media Investments 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 Stocks Directory module to find actively traded stocks across global markets.