Correlation Between Cholamandalam Financial and Aditya Birla

Can any of the company-specific risk be diversified away by investing in both Cholamandalam Financial and Aditya Birla 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 Cholamandalam Financial and Aditya Birla into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cholamandalam Financial Holdings and Aditya Birla Sun, you can compare the effects of market volatilities on Cholamandalam Financial and Aditya Birla 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 Cholamandalam Financial with a short position of Aditya Birla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cholamandalam Financial and Aditya Birla.

Diversification Opportunities for Cholamandalam Financial and Aditya Birla

-0.8

Correlation Coefficient

Cholamandalam Financial  Aditya Birla

Pay attention - limited upside

The 3 months correlation between Cholamandalam and Aditya is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cholamandalam Financial Holdin and Aditya Birla Sun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aditya Birla Sun and Cholamandalam Financial 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 Cholamandalam Financial Holdings are associated (or correlated) with Aditya Birla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aditya Birla Sun has no effect on the direction of Cholamandalam Financial i.e., Cholamandalam Financial and Aditya Birla go up and down completely randomly.

Pair Corralation between Cholamandalam Financial and Aditya Birla

Assuming the 90 days trading horizon Cholamandalam Financial Holdings is expected to under-perform the Aditya Birla. But the stock apears to be less risky and, when comparing its historical volatility, Cholamandalam Financial Holdings is 1.07 times less risky than Aditya Birla. The stock trades about -0.11 of its potential returns per unit of risk. The Aditya Birla Sun is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  72,350  in Aditya Birla Sun on September 7, 2024 and sell it today you would earn a total of  12,865  from holding Aditya Birla Sun or generate 17.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Cholamandalam Financial Holdin  vs.  Aditya Birla Sun

Cholamandalam Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aditya Birla Sun

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aditya Birla Sun are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Aditya Birla exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cholamandalam Financial and Aditya Birla

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

The idea behind Cholamandalam Financial Holdings and Aditya Birla Sun 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.