Correlation Between Tips Music and Golden Tobacco

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

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

Diversification Opportunities for Tips Music and Golden Tobacco

0.32

Correlation Coefficient

Tips Music  Golden Tobacco

Weak diversification

The 3 months correlation between Tips and Golden is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Tips Music Limited and Golden Tobacco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Tobacco and Tips Music 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 Tips Music Limited are associated (or correlated) with Golden Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Tobacco has no effect on the direction of Tips Music i.e., Tips Music and Golden Tobacco go up and down completely randomly.

Pair Corralation between Tips Music and Golden Tobacco

Assuming the 90 days trading horizon Tips Music Limited is expected to under-perform the Golden Tobacco. In addition to that, Tips Music is 1.02 times more volatile than Golden Tobacco Limited. It trades about -0.08 of its total potential returns per unit of risk. Golden Tobacco Limited is currently generating about -0.05 per unit of volatility. If you would invest  4,001  in Golden Tobacco Limited on December 27, 2024 and sell it today you would lose (446.00) from holding Golden Tobacco Limited or give up 11.15% of portfolio value over 90 days.

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

Tips Music Limited  vs.  Golden Tobacco Limited

Tips Music Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tips Music Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Golden Tobacco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golden Tobacco Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Tips Music and Golden Tobacco

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

The idea behind Tips Music Limited and Golden Tobacco 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.