Correlation Between Bharti Airtel and Servotech Power

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

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

Diversification Opportunities for Bharti Airtel and Servotech Power

0.3

Correlation Coefficient

Bharti Airtel  Servotech Power

Weak diversification

The 3 months correlation between Bharti and Servotech is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bharti Airtel Limited and Servotech Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Servotech Power Systems and Bharti Airtel 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 Bharti Airtel Limited are associated (or correlated) with Servotech Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Servotech Power Systems has no effect on the direction of Bharti Airtel i.e., Bharti Airtel and Servotech Power go up and down completely randomly.

Pair Corralation between Bharti Airtel and Servotech Power

Assuming the 90 days trading horizon Bharti Airtel is expected to generate 1.66 times less return on investment than Servotech Power. But when comparing it to its historical volatility, Bharti Airtel Limited is 2.19 times less risky than Servotech Power. It trades about 0.16 of its potential returns per unit of risk. Servotech Power Systems is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,578  in Servotech Power Systems on September 14, 2024 and sell it today you would earn a total of  10,205  from holding Servotech Power Systems or generate 134.67% return on investment over 90 days.

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

Bharti Airtel Limited  vs.  Servotech Power Systems

Bharti Airtel Limited

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bharti Airtel Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bharti Airtel is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Servotech Power Systems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Servotech Power Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Servotech Power is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bharti Airtel and Servotech Power

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

The idea behind Bharti Airtel Limited and Servotech Power Systems 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.