Correlation Between Tata Consultancy and Phoenix Mills

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

By analyzing existing cross correlation between Tata Consultancy Services and The Phoenix Mills, you can compare the effects of market volatilities on Tata Consultancy and Phoenix Mills 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 Consultancy with a short position of Phoenix Mills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Consultancy and Phoenix Mills.

Diversification Opportunities for Tata Consultancy and Phoenix Mills

0.48

Correlation Coefficient

Tata Consultancy  Phoenix Mills

Very weak diversification

The 3 months correlation between Tata and Phoenix is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Tata Consultancy Services and The Phoenix Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phoenix Mills and Tata Consultancy 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 Consultancy Services are associated (or correlated) with Phoenix Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phoenix Mills has no effect on the direction of Tata Consultancy i.e., Tata Consultancy and Phoenix Mills go up and down completely randomly.

Pair Corralation between Tata Consultancy and Phoenix Mills

Assuming the 90 days trading horizon Tata Consultancy Services is expected to generate 0.52 times more return on investment than Phoenix Mills. However, Tata Consultancy Services is 1.91 times less risky than Phoenix Mills. It trades about -0.55 of its potential returns per unit of risk. The Phoenix Mills is currently generating about -0.32 per unit of risk. If you would invest  406,865  in Tata Consultancy Services on December 5, 2024 and sell it today you would lose (53,660) from holding Tata Consultancy Services or give up 13.19% of portfolio value over 90 days.

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

Tata Consultancy Services  vs.  The Phoenix Mills

Tata Consultancy Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tata Consultancy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady 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.

Phoenix Mills

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Phoenix Mills has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Tata Consultancy and Phoenix Mills

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

The idea behind Tata Consultancy Services and The Phoenix Mills 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.