Correlation Between Power Mech and V Mart

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

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

Diversification Opportunities for Power Mech and V Mart

0.79

Correlation Coefficient

Power Mech  V Mart

Poor diversification

The 3 months correlation between Power and VMART is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Power Mech Projects 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 Power Mech 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 Mech Projects 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 Power Mech i.e., Power Mech and V Mart go up and down completely randomly.

Pair Corralation between Power Mech and V Mart

Assuming the 90 days trading horizon Power Mech Projects is expected to generate 1.6 times more return on investment than V Mart. However, Power Mech is 1.6 times more volatile than V Mart Retail Limited. It trades about 0.09 of its potential returns per unit of risk. V Mart Retail Limited is currently generating about -0.16 per unit of risk. If you would invest  274,355  in Power Mech Projects on October 6, 2024 and sell it today you would earn a total of  11,880  from holding Power Mech Projects or generate 4.33% return on investment over 90 days.

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

Power Mech Projects  vs.  V Mart Retail Limited

Power Mech Projects

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Mech Projects has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Power Mech and V Mart

The main advantage of trading using opposite Power Mech and V Mart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Mech 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 Power Mech Projects 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.