Correlation Between Federal Bank and V Mart

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

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

Diversification Opportunities for Federal Bank and V Mart

-0.4

Correlation Coefficient

Federal Bank  V Mart

Very good diversification

The 3 months correlation between Federal and VMART is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding The Federal Bank and V Mart Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on V Mart Retail and Federal Bank 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 The Federal Bank are associated (or correlated) with V Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of V Mart Retail has no effect on the direction of Federal Bank i.e., Federal Bank and V Mart go up and down completely randomly.

Pair Corralation between Federal Bank and V Mart

Assuming the 90 days trading horizon The Federal Bank is expected to generate 0.73 times more return on investment than V Mart. However, The Federal Bank is 1.37 times less risky than V Mart. It trades about -0.03 of its potential returns per unit of risk. V Mart Retail Limited is currently generating about -0.15 per unit of risk. If you would invest  19,674  in The Federal Bank on October 12, 2024 and sell it today you would lose (764.00) from holding The Federal Bank or give up 3.88% of portfolio value over 90 days.

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

The Federal Bank  vs.  V Mart Retail Limited

Federal Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Federal Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Federal Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

V Mart Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days V Mart Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Federal Bank and V Mart

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

The idea behind The Federal Bank and V Mart 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.