Correlation Between Vodafone Idea and Indo Rama

Can any of the company-specific risk be diversified away by investing in both Vodafone Idea and Indo Rama 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 Vodafone Idea and Indo Rama into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vodafone Idea Limited and Indo Rama Synthetics, you can compare the effects of market volatilities on Vodafone Idea and Indo Rama 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 Vodafone Idea with a short position of Indo Rama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodafone Idea and Indo Rama.

Diversification Opportunities for Vodafone Idea and Indo Rama

0.69

Correlation Coefficient

Vodafone Idea  Indo Rama

Poor diversification

The 3 months correlation between Vodafone and Indo is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Idea Limited and Indo Rama Synthetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Rama Synthetics and Vodafone Idea 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 Vodafone Idea Limited are associated (or correlated) with Indo Rama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Rama Synthetics has no effect on the direction of Vodafone Idea i.e., Vodafone Idea and Indo Rama go up and down completely randomly.

Pair Corralation between Vodafone Idea and Indo Rama

Assuming the 90 days trading horizon Vodafone Idea Limited is expected to generate 0.89 times more return on investment than Indo Rama. However, Vodafone Idea Limited is 1.12 times less risky than Indo Rama. It trades about 0.07 of its potential returns per unit of risk. Indo Rama Synthetics is currently generating about -0.12 per unit of risk. If you would invest  808.00  in Vodafone Idea Limited on October 6, 2024 and sell it today you would earn a total of  19.00  from holding Vodafone Idea Limited or generate 2.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Vodafone Idea Limited  vs.  Indo Rama Synthetics

Vodafone Idea Limited

Risk-Adjusted Performance

0 of 100

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 latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Indo Rama Synthetics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Rama Synthetics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Indo Rama is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vodafone Idea and Indo Rama

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

The idea behind Vodafone Idea Limited and Indo Rama Synthetics 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.