Correlation Between Eros International and Vodafone Idea

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Can any of the company-specific risk be diversified away by investing in both Eros International and Vodafone Idea 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 Eros International and Vodafone Idea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eros International Media and Vodafone Idea Limited, you can compare the effects of market volatilities on Eros International and Vodafone Idea 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 Eros International with a short position of Vodafone Idea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eros International and Vodafone Idea.

Diversification Opportunities for Eros International and Vodafone Idea

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Eros and Vodafone is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Eros International Media and Vodafone Idea Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Idea Limited and Eros International 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 Eros International Media are associated (or correlated) with Vodafone Idea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Idea Limited has no effect on the direction of Eros International i.e., Eros International and Vodafone Idea go up and down completely randomly.

Pair Corralation between Eros International and Vodafone Idea

Assuming the 90 days trading horizon Eros International Media is expected to under-perform the Vodafone Idea. But the stock apears to be less risky and, when comparing its historical volatility, Eros International Media is 1.33 times less risky than Vodafone Idea. The stock trades about -0.05 of its potential returns per unit of risk. The Vodafone Idea Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,290  in Vodafone Idea Limited on September 3, 2024 and sell it today you would lose (462.00) from holding Vodafone Idea Limited or give up 35.81% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Eros International Media  vs.  Vodafone Idea Limited

 Performance 
       Timeline  
Eros International Media 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Eros International Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Vodafone Idea Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Vodafone Idea Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Eros International and Vodafone Idea Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Eros International and Vodafone Idea

The main advantage of trading using opposite Eros International and Vodafone Idea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eros International position performs unexpectedly, Vodafone Idea 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 Vodafone Idea will offset losses from the drop in Vodafone Idea's long position.
The idea behind Eros International Media and Vodafone Idea 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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