Correlation Between DLF and Tech Mahindra

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

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

Diversification Opportunities for DLF and Tech Mahindra

0.79

Correlation Coefficient

DLF  Tech Mahindra

Poor diversification

The 3 months correlation between DLF and Tech is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding DLF 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 DLF 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 DLF 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 DLF i.e., DLF and Tech Mahindra go up and down completely randomly.

Pair Corralation between DLF and Tech Mahindra

Assuming the 90 days trading horizon DLF Limited is expected to generate 1.39 times more return on investment than Tech Mahindra. However, DLF is 1.39 times more volatile than Tech Mahindra Limited. It trades about 0.19 of its potential returns per unit of risk. Tech Mahindra Limited is currently generating about 0.16 per unit of risk. If you would invest  67,590  in DLF Limited on April 20, 2025 and sell it today you would earn a total of  16,930  from holding DLF Limited or generate 25.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

DLF Limited  vs.  Tech Mahindra Limited

DLF Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DLF Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, DLF exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tech Mahindra Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tech Mahindra Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Tech Mahindra displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DLF and Tech Mahindra

The main advantage of trading using opposite DLF and Tech Mahindra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DLF 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.

The idea behind DLF Limited and Tech Mahindra 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.