Correlation Between Tarapur Transformers and Byke Hospitality

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

By analyzing existing cross correlation between Tarapur Transformers Limited and The Byke Hospitality, you can compare the effects of market volatilities on Tarapur Transformers and Byke Hospitality 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 Tarapur Transformers with a short position of Byke Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tarapur Transformers and Byke Hospitality.

Diversification Opportunities for Tarapur Transformers and Byke Hospitality

0.83

Correlation Coefficient

Tarapur Transformers  Byke Hospitality

Very poor diversification

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

Pair Corralation between Tarapur Transformers and Byke Hospitality

Assuming the 90 days trading horizon Tarapur Transformers Limited is expected to generate 0.85 times more return on investment than Byke Hospitality. However, Tarapur Transformers Limited is 1.18 times less risky than Byke Hospitality. It trades about 0.43 of its potential returns per unit of risk. The Byke Hospitality is currently generating about 0.17 per unit of risk. If you would invest  2,210  in Tarapur Transformers Limited on September 23, 2024 and sell it today you would earn a total of  2,339  from holding Tarapur Transformers Limited or generate 105.84% return on investment over 90 days.

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

Tarapur Transformers Limited  vs.  The Byke Hospitality

Tarapur Transformers

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Tarapur Transformers Limited are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Tarapur Transformers reported solid returns over the last few months and may actually be approaching a breakup point.

Byke Hospitality

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Byke Hospitality are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Byke Hospitality unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tarapur Transformers and Byke Hospitality

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

The idea behind Tarapur Transformers Limited and The Byke Hospitality 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.