Correlation Between Tata Investment and Fortis Healthcare

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

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

Diversification Opportunities for Tata Investment and Fortis Healthcare

-0.63

Correlation Coefficient

Tata Investment  Fortis Healthcare

Excellent diversification

The 3 months correlation between Tata and Fortis is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Tata Investment and Fortis Healthcare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortis Healthcare and Tata Investment 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 Tata Investment are associated (or correlated) with Fortis Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortis Healthcare has no effect on the direction of Tata Investment i.e., Tata Investment and Fortis Healthcare go up and down completely randomly.

Pair Corralation between Tata Investment and Fortis Healthcare

Assuming the 90 days trading horizon Tata Investment is expected to under-perform the Fortis Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Tata Investment is 1.18 times less risky than Fortis Healthcare. The stock trades about -0.07 of its potential returns per unit of risk. The Fortis Healthcare Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  56,185  in Fortis Healthcare Limited on September 2, 2024 and sell it today you would earn a total of  9,735  from holding Fortis Healthcare Limited or generate 17.33% return on investment over 90 days.

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

Tata Investment  vs.  Fortis Healthcare Limited

Tata Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Fortis Healthcare

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortis Healthcare Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Fortis Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tata Investment and Fortis Healthcare

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

The idea behind Tata Investment and Fortis Healthcare 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.