Correlation Between Electronics Mart and TVS Electronics

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

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

Diversification Opportunities for Electronics Mart and TVS Electronics

0.83

Correlation Coefficient

Electronics Mart  TVS Electronics

Very poor diversification

The 3 months correlation between Electronics and TVS is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Electronics Mart India and TVS Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TVS Electronics and Electronics Mart 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 Electronics Mart India are associated (or correlated) with TVS Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TVS Electronics has no effect on the direction of Electronics Mart i.e., Electronics Mart and TVS Electronics go up and down completely randomly.

Pair Corralation between Electronics Mart and TVS Electronics

Assuming the 90 days trading horizon Electronics Mart India is expected to under-perform the TVS Electronics. In addition to that, Electronics Mart is 1.23 times more volatile than TVS Electronics Limited. It trades about -0.08 of its total potential returns per unit of risk. TVS Electronics Limited is currently generating about -0.04 per unit of volatility. If you would invest  41,245  in TVS Electronics Limited on September 21, 2024 and sell it today you would lose (2,635) from holding TVS Electronics Limited or give up 6.39% of portfolio value over 90 days.

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

Electronics Mart India  vs.  TVS Electronics Limited

Electronics Mart India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electronics Mart India 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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

TVS Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TVS Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, TVS Electronics is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Electronics Mart and TVS Electronics

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

The idea behind Electronics Mart India and TVS Electronics 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.