Correlation Between Tera Software and Cantabil Retail

Can any of the company-specific risk be diversified away by investing in both Tera Software and Cantabil Retail 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 Tera Software and Cantabil Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Tera Software and Cantabil Retail

0.4

Correlation Coefficient

Tera Software  Cantabil Retail

Very weak diversification

The 3 months correlation between Tera and Cantabil is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Tera Software Limited and Cantabil Retail India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cantabil Retail India and Tera Software 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 Tera Software Limited are associated (or correlated) with Cantabil Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cantabil Retail India has no effect on the direction of Tera Software i.e., Tera Software and Cantabil Retail go up and down completely randomly.

Pair Corralation between Tera Software and Cantabil Retail

Assuming the 90 days trading horizon Tera Software is expected to generate 1.63 times less return on investment than Cantabil Retail. But when comparing it to its historical volatility, Tera Software Limited is 1.12 times less risky than Cantabil Retail. It trades about 0.01 of its potential returns per unit of risk. Cantabil Retail India is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  26,489  in Cantabil Retail India on December 26, 2024 and sell it today you would lose (18.00) from holding Cantabil Retail India or give up 0.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Tera Software Limited  vs.  Cantabil Retail India

Tera Software Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tera Software Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tera Software is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Cantabil Retail India

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cantabil Retail India are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Cantabil Retail is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Tera Software and Cantabil Retail

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

The idea behind Tera Software Limited and Cantabil Retail India 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.