Regression Analysis of Weekly Returns between NIFTY50 and Piramal Enterprises Limited
Title: Regression Relationship of Piramal Enterprises Limited (PEL) with NIFTY50.
Author: Pooja Rajput. [1st year MMS (JDBIMS)]
Introduction:
Piramal Enterprises Limited (PEL) is one of India’s leading diversified companies, with a presence in Financial Services and Pharmaceuticals. PEL’s consolidated revenues were ~US$1.7 billion in FY2020, with around ~34% of revenues generated from outside India. Driven by both organic as well as inorganic strategy, PEL has steered dynamic business growth over the three decades of its existence.
Objective:
To understand the regression relationship between average weekly returns of Nifty 50 and Piramal Enterprises Limited (PEL).
Data Collection:
The closing price data of Nifty50 and Piramal Enterprises Limited was taken from www.nseindia.com (National Stock Exchange) for the time period 1ST APRIL 2021 to 31ST MARCH 2022.
From the available data, the closing rates of all the Fridays in the year was sorted to find out weekly returns for both Nifty as well as Piramal Enterprises Limited then the weekly returns were calculated for both by using formula –
Weekly return = (C3-C2)/C2 *(100)
Where C3 represent week closing price and C2 is previous week closing price.
Once the data is calculated, weekly return column for NIFTY50 is considered as “X” variable and the weekly returns column for Piramal Enterprises Limited is considered as “Y” variable.
The Model and formulas used are:-
Y = a +bX
X ̅ =∑X/N
Y ̅=∑Y/N
x = X – X ̅
y = Y – Y ̅
b=∑ xy /∑(x)^2
a= Y ̅- bX ̅
e = Y – Y ̅
Variance of error=(σe)^2 =∑e^2/N-K
S.E of b = √ ((σe)^2 /∑x^2)
t stat of b = b/ S.E of b
TSS=ESS+RSS
ESS = (b^2)*(∑x^2)
RSS = ∑e^2
R^2 = ESS/TSS
F = Mean ESS/Mean RSS
Data Analysis:
Utilizing the Regression Add-on in Microsoft Excel Data Analytics tool below values were acquired
R Square = R^2 = 0.364481414
a = 0.060358947
b = 1.491164019
F = 24.6612784
P value = 0.927602
Below expression shows the relationship model between Piramal Enterprises Limited and NIFTY50 weekly returns:
Piramal Ent Ltd Weekly Return = 0.060358947 + 1.491164019*(NIFTY50 Weekly Return)
Conclusion:
Based on the collected data and its analysis we can conclude that only 30 % of Piramal Enterprises Limited weekly returns can be explained by NIFITY50 weekly returns, remaining 70% is depend upon Piramal Enterprises Limited’s fundamentals and policies. Also its evident that 1% increase in NIFTY50 returns will result in 1.49% increase in Piramal Enterprises Limited’s return. F is 24.66 and the P value 0.9276 which is greater than 0.05 it means the overall model is not statistically significant at 5% level.