Correlation Between Wipro and Tech Mahindra
Can any of the company-specific risk be diversified away by investing in both Wipro and Tech Mahindra 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 Wipro and Tech Mahindra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wipro Limited and Tech Mahindra Limited, you can compare the effects of market volatilities on Wipro and Tech Mahindra 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 Wipro with a short position of Tech Mahindra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wipro and Tech Mahindra.
Diversification Opportunities for Wipro and Tech Mahindra
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Wipro and Tech is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Wipro Limited and Tech Mahindra Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tech Mahindra Limited and Wipro 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 Wipro Limited are associated (or correlated) with Tech Mahindra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tech Mahindra Limited has no effect on the direction of Wipro i.e., Wipro and Tech Mahindra go up and down completely randomly.
Pair Corralation between Wipro and Tech Mahindra
Assuming the 90 days trading horizon Wipro Limited is expected to generate 7.97 times more return on investment than Tech Mahindra. However, Wipro is 7.97 times more volatile than Tech Mahindra Limited. It trades about 0.06 of its potential returns per unit of risk. Tech Mahindra Limited is currently generating about 0.07 per unit of risk. If you would invest 24,273 in Wipro Limited on November 3, 2024 and sell it today you would earn a total of 6,917 from holding Wipro Limited or generate 28.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Wipro Limited vs. Tech Mahindra Limited
Performance |
| Timeline |
| Wipro Limited |
| Tech Mahindra Limited |
Wipro and Tech Mahindra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wipro and Tech Mahindra
The main advantage of trading using opposite Wipro and Tech Mahindra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wipro position performs unexpectedly, Tech Mahindra 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 Tech Mahindra will offset losses from the drop in Tech Mahindra's long position.| Wipro vs. ILFS Investment Managers | Wipro vs. ZF Commercial Vehicle | Wipro vs. V2 Retail Limited | Wipro vs. SIL Investments Limited |
| Tech Mahindra vs. Plastiblends India Limited | Tech Mahindra vs. Sintex Plastics Technology | Tech Mahindra vs. Sonata Software Limited | Tech Mahindra vs. Karur Vysya Bank |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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