Correlation Between Yes Bank and Tech Mahindra

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

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

Diversification Opportunities for Yes Bank and Tech Mahindra

0.82

Correlation Coefficient

Yes Bank  Tech Mahindra

Very poor diversification

The 3 months correlation between Yes and Tech is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Yes Bank Limited and Tech Mahindra Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tech Mahindra Limited and Yes Bank 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 Yes Bank Limited are associated (or correlated) with Tech Mahindra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tech Mahindra Limited has no effect on the direction of Yes Bank i.e., Yes Bank and Tech Mahindra go up and down completely randomly.

Pair Corralation between Yes Bank and Tech Mahindra

Assuming the 90 days trading horizon Yes Bank Limited is expected to generate 1.2 times more return on investment than Tech Mahindra. However, Yes Bank is 1.2 times more volatile than Tech Mahindra Limited. It trades about -0.1 of its potential returns per unit of risk. Tech Mahindra Limited is currently generating about -0.18 per unit of risk. If you would invest  1,954  in Yes Bank Limited on December 30, 2024 and sell it today you would lose (266.00) from holding Yes Bank Limited or give up 13.61% of portfolio value over 90 days.

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

Yes Bank Limited  vs.  Tech Mahindra Limited

Yes Bank Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yes Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Tech Mahindra Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tech Mahindra Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Yes Bank and Tech Mahindra

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

The idea behind Yes Bank Limited and Tech Mahindra 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..