Correlation Between Computer Age and Tata Communications

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

By analyzing existing cross correlation between Computer Age Management and Tata Communications Limited, you can compare the effects of market volatilities on Computer Age and Tata Communications 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 Computer Age with a short position of Tata Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Computer Age and Tata Communications.

Diversification Opportunities for Computer Age and Tata Communications

0.8

Correlation Coefficient

Computer Age  Tata Communications

Very poor diversification

The 3 months correlation between Computer and Tata is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Computer Age Management and Tata Communications Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Communications and Computer Age 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 Computer Age Management are associated (or correlated) with Tata Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Communications has no effect on the direction of Computer Age i.e., Computer Age and Tata Communications go up and down completely randomly.

Pair Corralation between Computer Age and Tata Communications

Assuming the 90 days trading horizon Computer Age is expected to generate 1.98 times less return on investment than Tata Communications. In addition to that, Computer Age is 1.4 times more volatile than Tata Communications Limited. It trades about 0.05 of its total potential returns per unit of risk. Tata Communications Limited is currently generating about 0.15 per unit of volatility. If you would invest  154,994  in Tata Communications Limited on April 21, 2025 and sell it today you would earn a total of  21,386  from holding Tata Communications Limited or generate 13.8% return on investment over 90 days.

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

Computer Age Management  vs.  Tata Communications Limited

Computer Age Management

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Computer Age Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Computer Age may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Tata Communications

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tata Communications Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Tata Communications displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Computer Age and Tata Communications

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

The idea behind Computer Age Management and Tata Communications Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.