Correlation Between Viceroy Hotels and Tata Communications

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

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

Diversification Opportunities for Viceroy Hotels and Tata Communications

0.27

Correlation Coefficient

Viceroy Hotels  Tata Communications

Modest diversification

The 3 months correlation between Viceroy and Tata is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Viceroy Hotels Limited and Tata Communications Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Communications and Viceroy Hotels 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 Viceroy Hotels Limited are associated (or correlated) with Tata Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Communications has no effect on the direction of Viceroy Hotels i.e., Viceroy Hotels and Tata Communications go up and down completely randomly.

Pair Corralation between Viceroy Hotels and Tata Communications

Assuming the 90 days trading horizon Viceroy Hotels Limited is expected to generate 1.69 times more return on investment than Tata Communications. However, Viceroy Hotels is 1.69 times more volatile than Tata Communications Limited. It trades about -0.06 of its potential returns per unit of risk. Tata Communications Limited is currently generating about -0.11 per unit of risk. If you would invest  13,655  in Viceroy Hotels Limited on September 21, 2024 and sell it today you would lose (1,697) from holding Viceroy Hotels Limited or give up 12.43% of portfolio value over 90 days.

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

Viceroy Hotels Limited  vs.  Tata Communications Limited

Viceroy Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viceroy Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Tata Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Communications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Viceroy Hotels and Tata Communications

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

The idea behind Viceroy Hotels Limited and Tata Communications 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.