Correlation Between Power Finance and VIP Clothing

Can any of the company-specific risk be diversified away by investing in both Power Finance and VIP Clothing 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 Power Finance and VIP Clothing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Power Finance and VIP Clothing Limited, you can compare the effects of market volatilities on Power Finance and VIP Clothing 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 Power Finance with a short position of VIP Clothing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Finance and VIP Clothing.

Diversification Opportunities for Power Finance and VIP Clothing

0.48

Correlation Coefficient

Power Finance  VIP Clothing

Very weak diversification

The 3 months correlation between Power and VIP is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Power Finance and VIP Clothing Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIP Clothing Limited and Power Finance 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 Power Finance are associated (or correlated) with VIP Clothing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIP Clothing Limited has no effect on the direction of Power Finance i.e., Power Finance and VIP Clothing go up and down completely randomly.

Pair Corralation between Power Finance and VIP Clothing

Assuming the 90 days trading horizon Power Finance is expected to generate 1.32 times more return on investment than VIP Clothing. However, Power Finance is 1.32 times more volatile than VIP Clothing Limited. It trades about 0.1 of its potential returns per unit of risk. VIP Clothing Limited is currently generating about 0.01 per unit of risk. If you would invest  9,879  in Power Finance on October 21, 2024 and sell it today you would earn a total of  33,466  from holding Power Finance or generate 338.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Power Finance  vs.  VIP Clothing Limited

Power Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Power Finance is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

VIP Clothing Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VIP Clothing Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical indicators, VIP Clothing may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Power Finance and VIP Clothing

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

The idea behind Power Finance and VIP Clothing 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.