Correlation Between Tata Investment and Investment Trust

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

By analyzing existing cross correlation between Tata Investment and The Investment Trust, you can compare the effects of market volatilities on Tata Investment and Investment Trust 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 Investment Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Investment and Investment Trust.

Diversification Opportunities for Tata Investment and Investment Trust

-0.47

Correlation Coefficient

Tata Investment  Investment Trust

Very good diversification

The 3 months correlation between Tata and Investment is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Tata Investment and The Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Trust 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 Investment Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Trust has no effect on the direction of Tata Investment i.e., Tata Investment and Investment Trust go up and down completely randomly.

Pair Corralation between Tata Investment and Investment Trust

Assuming the 90 days trading horizon Tata Investment is expected to under-perform the Investment Trust. But the stock apears to be less risky and, when comparing its historical volatility, Tata Investment is 1.56 times less risky than Investment Trust. The stock trades about -0.04 of its potential returns per unit of risk. The The Investment Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  18,276  in The Investment Trust on September 3, 2024 and sell it today you would earn a total of  1,958  from holding The Investment Trust or generate 10.71% return on investment over 90 days.

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

Tata Investment  vs.  The Investment Trust

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 fairly stable technical and fundamental indicators, Tata Investment is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Investment Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Investment Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Investment Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tata Investment and Investment Trust

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

The idea behind Tata Investment and The Investment Trust 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.