Correlation Between Tata Communications and Aptech

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

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

Diversification Opportunities for Tata Communications and Aptech

0.07

Correlation Coefficient

Tata Communications  Aptech

Significant diversification

The 3 months correlation between Tata and Aptech is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Tata Communications Limited and Aptech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptech Limited and Tata Communications 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 Tata Communications Limited are associated (or correlated) with Aptech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptech Limited has no effect on the direction of Tata Communications i.e., Tata Communications and Aptech go up and down completely randomly.

Pair Corralation between Tata Communications and Aptech

Assuming the 90 days trading horizon Tata Communications is expected to generate 1.24 times less return on investment than Aptech. But when comparing it to its historical volatility, Tata Communications Limited is 2.54 times less risky than Aptech. It trades about 0.15 of its potential returns per unit of risk. Aptech Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  12,534  in Aptech Limited on April 21, 2025 and sell it today you would earn a total of  1,720  from holding Aptech Limited or generate 13.72% return on investment over 90 days.

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

Tata Communications Limited  vs.  Aptech Limited

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.

Aptech Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aptech Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Aptech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tata Communications and Aptech

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

The idea behind Tata Communications Limited and Aptech 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.