Correlation Between Tata Motors and PTC India

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

By analyzing existing cross correlation between Tata Motors Limited and PTC India Financial, you can compare the effects of market volatilities on Tata Motors and PTC India 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 Motors with a short position of PTC India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Motors and PTC India.

Diversification Opportunities for Tata Motors and PTC India

0.83

Correlation Coefficient

Tata Motors  PTC India

Very poor diversification

The 3 months correlation between Tata and PTC is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Tata Motors Limited and PTC India Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PTC India Financial and Tata Motors 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 Motors Limited are associated (or correlated) with PTC India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PTC India Financial has no effect on the direction of Tata Motors i.e., Tata Motors and PTC India go up and down completely randomly.

Pair Corralation between Tata Motors and PTC India

Assuming the 90 days trading horizon Tata Motors Limited is expected to generate 0.69 times more return on investment than PTC India. However, Tata Motors Limited is 1.44 times less risky than PTC India. It trades about -0.02 of its potential returns per unit of risk. PTC India Financial is currently generating about -0.1 per unit of risk. If you would invest  74,080  in Tata Motors Limited on December 25, 2024 and sell it today you would lose (2,730) from holding Tata Motors Limited or give up 3.69% of portfolio value over 90 days.

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

Tata Motors Limited  vs.  PTC India Financial

Tata Motors Limited

Risk-Adjusted Performance

Very Weak

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

PTC India Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days PTC India Financial 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 rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Tata Motors and PTC India

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

The idea behind Tata Motors Limited and PTC India Financial 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.