Correlation Between Touchwood Entertainment and Eros International

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

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

Diversification Opportunities for Touchwood Entertainment and Eros International

0.58

Correlation Coefficient

Touchwood Entertainment  Eros International

Very weak diversification

The 3 months correlation between Touchwood and Eros is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Touchwood Entertainment Limite and Eros International Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eros International Media and Touchwood Entertainment 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 Touchwood Entertainment Limited are associated (or correlated) with Eros International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eros International Media has no effect on the direction of Touchwood Entertainment i.e., Touchwood Entertainment and Eros International go up and down completely randomly.

Pair Corralation between Touchwood Entertainment and Eros International

Assuming the 90 days trading horizon Touchwood Entertainment Limited is expected to generate 1.33 times more return on investment than Eros International. However, Touchwood Entertainment is 1.33 times more volatile than Eros International Media. It trades about 0.02 of its potential returns per unit of risk. Eros International Media is currently generating about -0.24 per unit of risk. If you would invest  15,157  in Touchwood Entertainment Limited on October 5, 2024 and sell it today you would earn a total of  157.00  from holding Touchwood Entertainment Limited or generate 1.04% return on investment over 90 days.

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

Touchwood Entertainment Limite  vs.  Eros International Media

Touchwood Entertainment

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Touchwood Entertainment Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Touchwood Entertainment is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Eros International Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eros International Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Touchwood Entertainment and Eros International

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

The idea behind Touchwood Entertainment Limited and Eros International Media 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.