Correlation Between Indian Metals and VA Tech
Can any of the company-specific risk be diversified away by investing in both Indian Metals and VA Tech 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 Indian Metals and VA Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indian Metals Ferro and VA Tech Wabag, you can compare the effects of market volatilities on Indian Metals and VA Tech 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 Indian Metals with a short position of VA Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Metals and VA Tech.
Diversification Opportunities for Indian Metals and VA Tech
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Indian and WABAG is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and VA Tech Wabag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VA Tech Wabag and Indian Metals 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 Indian Metals Ferro are associated (or correlated) with VA Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VA Tech Wabag has no effect on the direction of Indian Metals i.e., Indian Metals and VA Tech go up and down completely randomly.
Pair Corralation between Indian Metals and VA Tech
Assuming the 90 days trading horizon Indian Metals is expected to generate 1.21 times less return on investment than VA Tech. In addition to that, Indian Metals is 1.0 times more volatile than VA Tech Wabag. It trades about 0.1 of its total potential returns per unit of risk. VA Tech Wabag is currently generating about 0.12 per unit of volatility. If you would invest 32,460 in VA Tech Wabag on October 9, 2024 and sell it today you would earn a total of 123,620 from holding VA Tech Wabag or generate 380.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indian Metals Ferro vs. VA Tech Wabag
Performance |
| Timeline |
| Indian Metals Ferro |
| VA Tech Wabag |
Indian Metals and VA Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indian Metals and VA Tech
The main advantage of trading using opposite Indian Metals and VA Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Metals position performs unexpectedly, VA Tech 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 VA Tech will offset losses from the drop in VA Tech's long position.| Indian Metals vs. Cholamandalam Investment and | Indian Metals vs. Industrial Investment Trust | Indian Metals vs. BF Investment Limited | Indian Metals vs. Associated Alcohols Breweries |
| VA Tech vs. Dharani SugarsChemicals Limited | VA Tech vs. Juniper Hotels | VA Tech vs. JGCHEMICALS LIMITED | VA Tech vs. Total Transport Systems |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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