Correlation Between Teamlease Services and Gujarat Lease

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

By analyzing existing cross correlation between Teamlease Services Limited and Gujarat Lease Financing, you can compare the effects of market volatilities on Teamlease Services and Gujarat Lease 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 Teamlease Services with a short position of Gujarat Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teamlease Services and Gujarat Lease.

Diversification Opportunities for Teamlease Services and Gujarat Lease

0.23

Correlation Coefficient

Teamlease Services  Gujarat Lease

Modest diversification

The 3 months correlation between Teamlease and Gujarat is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Teamlease Services Limited and Gujarat Lease Financing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Lease Financing and Teamlease Services 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 Teamlease Services Limited are associated (or correlated) with Gujarat Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Lease Financing has no effect on the direction of Teamlease Services i.e., Teamlease Services and Gujarat Lease go up and down completely randomly.

Pair Corralation between Teamlease Services and Gujarat Lease

Assuming the 90 days trading horizon Teamlease Services Limited is expected to under-perform the Gujarat Lease. But the stock apears to be less risky and, when comparing its historical volatility, Teamlease Services Limited is 1.21 times less risky than Gujarat Lease. The stock trades about -0.08 of its potential returns per unit of risk. The Gujarat Lease Financing is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  838.00  in Gujarat Lease Financing on October 21, 2024 and sell it today you would earn a total of  49.00  from holding Gujarat Lease Financing or generate 5.85% return on investment over 90 days.

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

Teamlease Services Limited  vs.  Gujarat Lease Financing

Teamlease Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teamlease Services Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Gujarat Lease Financing

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Gujarat Lease may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Teamlease Services and Gujarat Lease

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

The idea behind Teamlease Services Limited and Gujarat Lease Financing 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.