Correlation Between Investment Trust and Tata Investment

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

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

Diversification Opportunities for Investment Trust and Tata Investment

-0.47

Correlation Coefficient

Investment Trust  Tata Investment

Very good diversification

The 3 months correlation between Investment and Tata is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding The Investment Trust and Tata Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Investment and Investment Trust 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 The Investment Trust are associated (or correlated) with Tata Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Investment has no effect on the direction of Investment Trust i.e., Investment Trust and Tata Investment go up and down completely randomly.

Pair Corralation between Investment Trust and Tata Investment

Assuming the 90 days trading horizon The Investment Trust is expected to generate 1.56 times more return on investment than Tata Investment. However, Investment Trust is 1.56 times more volatile than Tata Investment. It trades about 0.07 of its potential returns per unit of risk. Tata Investment is currently generating about -0.07 per unit of risk. If you would invest  18,501  in The Investment Trust on September 2, 2024 and sell it today you would earn a total of  1,733  from holding The Investment Trust or generate 9.37% return on investment over 90 days.

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

The Investment Trust  vs.  Tata Investment

Investment Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Investment Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Investment Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tata Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Investment Trust and Tata Investment

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

The idea behind The Investment Trust and Tata Investment 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.