Correlation Between Tamilnad Mercantile and Bodhi Tree

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

By analyzing existing cross correlation between Tamilnad Mercantile Bank and Bodhi Tree Multimedia, you can compare the effects of market volatilities on Tamilnad Mercantile and Bodhi Tree 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 Tamilnad Mercantile with a short position of Bodhi Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tamilnad Mercantile and Bodhi Tree.

Diversification Opportunities for Tamilnad Mercantile and Bodhi Tree

-0.17

Correlation Coefficient

Tamilnad Mercantile  Bodhi Tree

Good diversification

The 3 months correlation between Tamilnad and Bodhi is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Tamilnad Mercantile Bank and Bodhi Tree Multimedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bodhi Tree Multimedia and Tamilnad Mercantile 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 Tamilnad Mercantile Bank are associated (or correlated) with Bodhi Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bodhi Tree Multimedia has no effect on the direction of Tamilnad Mercantile i.e., Tamilnad Mercantile and Bodhi Tree go up and down completely randomly.

Pair Corralation between Tamilnad Mercantile and Bodhi Tree

Assuming the 90 days trading horizon Tamilnad Mercantile Bank is expected to generate 0.43 times more return on investment than Bodhi Tree. However, Tamilnad Mercantile Bank is 2.33 times less risky than Bodhi Tree. It trades about 0.18 of its potential returns per unit of risk. Bodhi Tree Multimedia is currently generating about -0.09 per unit of risk. If you would invest  44,345  in Tamilnad Mercantile Bank on September 24, 2024 and sell it today you would earn a total of  2,475  from holding Tamilnad Mercantile Bank or generate 5.58% return on investment over 90 days.

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

Tamilnad Mercantile Bank  vs.  Bodhi Tree Multimedia

Tamilnad Mercantile Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bodhi Tree Multimedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bodhi Tree Multimedia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Tamilnad Mercantile and Bodhi Tree

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

The idea behind Tamilnad Mercantile Bank and Bodhi Tree Multimedia 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.