Correlation Between City Union and V2 Retail

Can any of the company-specific risk be diversified away by investing in both City Union and V2 Retail 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 City Union and V2 Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between City Union Bank and V2 Retail Limited, you can compare the effects of market volatilities on City Union and V2 Retail 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 City Union with a short position of V2 Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Union and V2 Retail.

Diversification Opportunities for City Union and V2 Retail

-0.27

Correlation Coefficient

City Union  V2 Retail

Very good diversification

The 3 months correlation between City and V2RETAIL is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding City Union Bank and V2 Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on V2 Retail Limited and City Union 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 City Union Bank are associated (or correlated) with V2 Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of V2 Retail Limited has no effect on the direction of City Union i.e., City Union and V2 Retail go up and down completely randomly.

Pair Corralation between City Union and V2 Retail

Assuming the 90 days trading horizon City Union Bank is expected to generate 0.46 times more return on investment than V2 Retail. However, City Union Bank is 2.19 times less risky than V2 Retail. It trades about -0.44 of its potential returns per unit of risk. V2 Retail Limited is currently generating about -0.34 per unit of risk. If you would invest  17,325  in City Union Bank on December 4, 2024 and sell it today you would lose (2,390) from holding City Union Bank or give up 13.8% of portfolio value over 90 days.

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

City Union Bank  vs.  V2 Retail Limited

City Union Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days City Union Bank 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

V2 Retail Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in V2 Retail Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, V2 Retail demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with City Union and V2 Retail

The main advantage of trading using opposite City Union and V2 Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Union position performs unexpectedly, V2 Retail 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 V2 Retail will offset losses from the drop in V2 Retail's long position.

The idea behind City Union Bank and V2 Retail 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.