Correlation Between Tech Mahindra and Mangalam Drugs

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

By analyzing existing cross correlation between Tech Mahindra Limited and Mangalam Drugs And, you can compare the effects of market volatilities on Tech Mahindra and Mangalam Drugs 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 Tech Mahindra with a short position of Mangalam Drugs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tech Mahindra and Mangalam Drugs.

Diversification Opportunities for Tech Mahindra and Mangalam Drugs

0.05

Correlation Coefficient

Tech Mahindra  Mangalam Drugs

Significant diversification

The 3 months correlation between Tech and Mangalam is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Tech Mahindra Limited and Mangalam Drugs And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mangalam Drugs And and Tech Mahindra 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 Tech Mahindra Limited are associated (or correlated) with Mangalam Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mangalam Drugs And has no effect on the direction of Tech Mahindra i.e., Tech Mahindra and Mangalam Drugs go up and down completely randomly.

Pair Corralation between Tech Mahindra and Mangalam Drugs

Assuming the 90 days trading horizon Tech Mahindra Limited is expected to under-perform the Mangalam Drugs. But the stock apears to be less risky and, when comparing its historical volatility, Tech Mahindra Limited is 1.75 times less risky than Mangalam Drugs. The stock trades about -0.22 of its potential returns per unit of risk. The Mangalam Drugs And is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  12,050  in Mangalam Drugs And on October 10, 2024 and sell it today you would lose (704.00) from holding Mangalam Drugs And or give up 5.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Tech Mahindra Limited  vs.  Mangalam Drugs And

Tech Mahindra Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tech Mahindra Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Tech Mahindra is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Mangalam Drugs And

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mangalam Drugs And has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Mangalam Drugs is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tech Mahindra and Mangalam Drugs

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

The idea behind Tech Mahindra Limited and Mangalam Drugs And 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.