Correlation Between N B and V Mart

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

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

Diversification Opportunities for N B and V Mart

-0.18

Correlation Coefficient

N B  V Mart

Good diversification

The 3 months correlation between NBIFIN and VMART is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding N B I 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 N B 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 N B I 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 N B i.e., N B and V Mart go up and down completely randomly.

Pair Corralation between N B and V Mart

Assuming the 90 days trading horizon N B I is expected to generate 0.99 times more return on investment than V Mart. However, N B I is 1.01 times less risky than V Mart. It trades about 0.26 of its potential returns per unit of risk. V Mart Retail Limited is currently generating about 0.06 per unit of risk. If you would invest  244,880  in N B I on September 14, 2024 and sell it today you would earn a total of  136,930  from holding N B I or generate 55.92% return on investment over 90 days.

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

N B I  vs.  V Mart Retail Limited

N B I

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in N B I are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady technical and fundamental indicators, N B sustained solid returns over the last few months and may actually be approaching a breakup point.

V Mart Retail

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in V Mart Retail Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, V Mart may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with N B and V Mart

The main advantage of trading using opposite N B and V Mart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if N B 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 N B I 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.