Correlation Between Tata Consultancy and Amrutanjan Health

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

By analyzing existing cross correlation between Tata Consultancy Services and Amrutanjan Health Care, you can compare the effects of market volatilities on Tata Consultancy and Amrutanjan Health 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 Consultancy with a short position of Amrutanjan Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Consultancy and Amrutanjan Health.

Diversification Opportunities for Tata Consultancy and Amrutanjan Health

0.13

Correlation Coefficient

Tata Consultancy  Amrutanjan Health

Average diversification

The 3 months correlation between Tata and Amrutanjan is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Tata Consultancy Services and Amrutanjan Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amrutanjan Health Care and Tata Consultancy 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 Consultancy Services are associated (or correlated) with Amrutanjan Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amrutanjan Health Care has no effect on the direction of Tata Consultancy i.e., Tata Consultancy and Amrutanjan Health go up and down completely randomly.

Pair Corralation between Tata Consultancy and Amrutanjan Health

Assuming the 90 days trading horizon Tata Consultancy Services is expected to generate 0.9 times more return on investment than Amrutanjan Health. However, Tata Consultancy Services is 1.11 times less risky than Amrutanjan Health. It trades about 0.04 of its potential returns per unit of risk. Amrutanjan Health Care is currently generating about 0.02 per unit of risk. If you would invest  409,085  in Tata Consultancy Services on September 26, 2024 and sell it today you would earn a total of  8,865  from holding Tata Consultancy Services or generate 2.17% return on investment over 90 days.

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

Tata Consultancy Services  vs.  Amrutanjan Health Care

Tata Consultancy Services

Risk-Adjusted Performance

0 of 100

Very Weak

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

Amrutanjan Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amrutanjan Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking indicators, Amrutanjan Health is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Tata Consultancy and Amrutanjan Health

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

The idea behind Tata Consultancy Services and Amrutanjan Health Care 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.