Correlation Between Tata Investment and Saksoft

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

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

Diversification Opportunities for Tata Investment and Saksoft

0.33

Correlation Coefficient

Tata Investment  Saksoft

Weak diversification

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

Pair Corralation between Tata Investment and Saksoft

Assuming the 90 days trading horizon Tata Investment is expected to generate 0.89 times more return on investment than Saksoft. However, Tata Investment is 1.13 times less risky than Saksoft. It trades about 0.0 of its potential returns per unit of risk. Saksoft Limited is currently generating about -0.28 per unit of risk. If you would invest  689,390  in Tata Investment on October 8, 2024 and sell it today you would lose (360.00) from holding Tata Investment or give up 0.05% 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.  Saksoft Limited

Tata Investment

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tata Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Tata Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Saksoft Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Saksoft Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Tata Investment and Saksoft

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

The idea behind Tata Investment and Saksoft Limited 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.