Correlation Between Tamilnad Mercantile and City Union
Can any of the company-specific risk be diversified away by investing in both Tamilnad Mercantile and City Union 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 City Union 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 City Union Bank, you can compare the effects of market volatilities on Tamilnad Mercantile and City Union 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 City Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tamilnad Mercantile and City Union.
Diversification Opportunities for Tamilnad Mercantile and City Union
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Tamilnad and City is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Tamilnad Mercantile Bank and City Union Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Union Bank 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 City Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Union Bank has no effect on the direction of Tamilnad Mercantile i.e., Tamilnad Mercantile and City Union go up and down completely randomly.
Pair Corralation between Tamilnad Mercantile and City Union
Assuming the 90 days trading horizon Tamilnad Mercantile is expected to generate 1.83 times less return on investment than City Union. But when comparing it to its historical volatility, Tamilnad Mercantile Bank is 1.24 times less risky than City Union. It trades about 0.01 of its potential returns per unit of risk. City Union Bank is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 16,969 in City Union Bank on August 31, 2024 and sell it today you would earn a total of 999.00 from holding City Union Bank or generate 5.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.57% |
| Values | Daily Returns |
Tamilnad Mercantile Bank vs. City Union Bank
Performance |
| Timeline |
| Tamilnad Mercantile Bank |
| City Union Bank |
Tamilnad Mercantile and City Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tamilnad Mercantile and City Union
The main advantage of trading using opposite Tamilnad Mercantile and City Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tamilnad Mercantile position performs unexpectedly, City Union 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 City Union will offset losses from the drop in City Union's long position.| Tamilnad Mercantile vs. UFO Moviez India | Tamilnad Mercantile vs. Yatra Online Limited | Tamilnad Mercantile vs. Paramount Communications Limited | Tamilnad Mercantile vs. ROUTE MOBILE LIMITED |
| City Union vs. ICICI Securities Limited | City Union vs. Nippon Life India | City Union vs. Fortis Healthcare Limited | City Union vs. ICICI Lombard General |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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