Correlation Between Tata Consultancy and DJ Mediaprint

Can any of the company-specific risk be diversified away by investing in both Tata Consultancy and DJ Mediaprint 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 DJ Mediaprint 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 DJ Mediaprint Logistics, you can compare the effects of market volatilities on Tata Consultancy and DJ Mediaprint 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 DJ Mediaprint. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Consultancy and DJ Mediaprint.

Diversification Opportunities for Tata Consultancy and DJ Mediaprint

0.59

Correlation Coefficient

Tata Consultancy  DJ Mediaprint

Very weak diversification

The 3 months correlation between Tata and DJML is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Tata Consultancy Services and DJ Mediaprint Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DJ Mediaprint Logistics 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 DJ Mediaprint. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DJ Mediaprint Logistics has no effect on the direction of Tata Consultancy i.e., Tata Consultancy and DJ Mediaprint go up and down completely randomly.

Pair Corralation between Tata Consultancy and DJ Mediaprint

Assuming the 90 days trading horizon Tata Consultancy is expected to generate 30.56 times less return on investment than DJ Mediaprint. But when comparing it to its historical volatility, Tata Consultancy Services is 17.9 times less risky than DJ Mediaprint. It trades about 0.05 of its potential returns per unit of risk. DJ Mediaprint Logistics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5,228  in DJ Mediaprint Logistics on September 13, 2024 and sell it today you would earn a total of  12,941  from holding DJ Mediaprint Logistics or generate 247.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.18%
Values	Daily Returns

Tata Consultancy Services  vs.  DJ Mediaprint Logistics

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

DJ Mediaprint Logistics

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DJ Mediaprint Logistics are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, DJ Mediaprint unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tata Consultancy and DJ Mediaprint

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

The idea behind Tata Consultancy Services and DJ Mediaprint Logistics 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.