Correlation Between NIFTY SUMER and Vesuvius India

Can any of the company-specific risk be diversified away by investing in both NIFTY SUMER and Vesuvius India 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 NIFTY SUMER and Vesuvius India into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NIFTY SUMER DURABLES and Vesuvius India Limited, you can compare the effects of market volatilities on NIFTY SUMER and Vesuvius India 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 NIFTY SUMER with a short position of Vesuvius India. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIFTY SUMER and Vesuvius India.

Diversification Opportunities for NIFTY SUMER and Vesuvius India

-0.14

Correlation Coefficient

NIFTY SUMER  Vesuvius India

Good diversification

The 3 months correlation between NIFTY and Vesuvius is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding NIFTY SUMER DURABLES and Vesuvius India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vesuvius India and NIFTY SUMER 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 NIFTY SUMER DURABLES are associated (or correlated) with Vesuvius India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vesuvius India has no effect on the direction of NIFTY SUMER i.e., NIFTY SUMER and Vesuvius India go up and down completely randomly.

Pair Corralation between NIFTY SUMER and Vesuvius India

Assuming the 90 days trading horizon NIFTY SUMER DURABLES is expected to generate 0.64 times more return on investment than Vesuvius India. However, NIFTY SUMER DURABLES is 1.56 times less risky than Vesuvius India. It trades about 0.25 of its potential returns per unit of risk. Vesuvius India Limited is currently generating about -0.19 per unit of risk. If you would invest  3,929,440  in NIFTY SUMER DURABLES on October 6, 2024 and sell it today you would earn a total of  392,795  from holding NIFTY SUMER DURABLES or generate 10.0% return on investment over 90 days.

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

NIFTY SUMER DURABLES  vs.  Vesuvius India Limited

Pair Trading with NIFTY SUMER and Vesuvius India

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

The idea behind NIFTY SUMER DURABLES and Vesuvius India 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.