Correlation Between Tera Software and SBI Cards

Can any of the company-specific risk be diversified away by investing in both Tera Software and SBI Cards 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 SBI Cards 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 SBI Cards and, you can compare the effects of market volatilities on Tera Software and SBI Cards 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 SBI Cards. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tera Software and SBI Cards.

Diversification Opportunities for Tera Software and SBI Cards

-0.31

Correlation Coefficient

Tera Software  SBI Cards

Very good diversification

The 3 months correlation between Tera and SBI is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Tera Software Limited and SBI Cards and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Cards 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 SBI Cards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Cards has no effect on the direction of Tera Software i.e., Tera Software and SBI Cards go up and down completely randomly.

Pair Corralation between Tera Software and SBI Cards

Assuming the 90 days trading horizon Tera Software Limited is expected to generate 1.08 times more return on investment than SBI Cards. However, Tera Software is 1.08 times more volatile than SBI Cards and. It trades about 0.08 of its potential returns per unit of risk. SBI Cards and is currently generating about 0.05 per unit of risk. If you would invest  18,194  in Tera Software Limited on October 9, 2024 and sell it today you would earn a total of  517.00  from holding Tera Software Limited or generate 2.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Tera Software Limited  vs.  SBI Cards and

Tera Software Limited

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tera Software Limited are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Tera Software reported solid returns over the last few months and may actually be approaching a breakup point.

SBI Cards

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBI Cards and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SBI Cards is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tera Software and SBI Cards

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

The idea behind Tera Software Limited and SBI Cards 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.