Correlation Between Tube Investments and CEAT

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

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

Diversification Opportunities for Tube Investments and CEAT

-0.36

Correlation Coefficient

Tube Investments  CEAT

Very good diversification

The 3 months correlation between Tube and CEAT is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Tube Investments of and CEAT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEAT Limited and Tube Investments 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 Tube Investments of are associated (or correlated) with CEAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEAT Limited has no effect on the direction of Tube Investments i.e., Tube Investments and CEAT go up and down completely randomly.

Pair Corralation between Tube Investments and CEAT

Assuming the 90 days trading horizon Tube Investments of is expected to generate 0.82 times more return on investment than CEAT. However, Tube Investments of is 1.22 times less risky than CEAT. It trades about -0.08 of its potential returns per unit of risk. CEAT Limited is currently generating about -0.17 per unit of risk. If you would invest  371,015  in Tube Investments of on October 8, 2024 and sell it today you would lose (10,050) from holding Tube Investments of or give up 2.71% of portfolio value over 90 days.

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

Tube Investments of  vs.  CEAT Limited

Tube Investments

Risk-Adjusted Performance

0 of 100

Very Weak

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

CEAT Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CEAT Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, CEAT may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tube Investments and CEAT

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

The idea behind Tube Investments of and CEAT Limited 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 Global Correlations module to find global opportunities by holding instruments from different markets.