Correlation Between Tata Investment and Sandhar Technologies

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

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

Diversification Opportunities for Tata Investment and Sandhar Technologies

0.34

Correlation Coefficient

Tata Investment  Sandhar Technologies

Weak diversification

The 3 months correlation between Tata and Sandhar is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Tata Investment and Sandhar Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandhar Technologies 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 Sandhar Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandhar Technologies has no effect on the direction of Tata Investment i.e., Tata Investment and Sandhar Technologies go up and down completely randomly.

Pair Corralation between Tata Investment and Sandhar Technologies

Assuming the 90 days trading horizon Tata Investment is expected to generate 0.67 times more return on investment than Sandhar Technologies. However, Tata Investment is 1.5 times less risky than Sandhar Technologies. It trades about -0.05 of its potential returns per unit of risk. Sandhar Technologies Limited is currently generating about -0.1 per unit of risk. If you would invest  693,760  in Tata Investment on October 12, 2024 and sell it today you would lose (38,150) from holding Tata Investment or give up 5.5% 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.  Sandhar Technologies Limited

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 recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sandhar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandhar Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Tata Investment and Sandhar Technologies

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

The idea behind Tata Investment and Sandhar Technologies 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.