Correlation Between Sapphire Foods and Vedanta

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

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

Diversification Opportunities for Sapphire Foods and Vedanta

0.12

Correlation Coefficient

Sapphire Foods  Vedanta

Average diversification

The 3 months correlation between Sapphire and Vedanta is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sapphire Foods India and Vedanta Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vedanta Limited and Sapphire Foods 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 Sapphire Foods India are associated (or correlated) with Vedanta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vedanta Limited has no effect on the direction of Sapphire Foods i.e., Sapphire Foods and Vedanta go up and down completely randomly.

Pair Corralation between Sapphire Foods and Vedanta

Assuming the 90 days trading horizon Sapphire Foods India is expected to under-perform the Vedanta. In addition to that, Sapphire Foods is 1.32 times more volatile than Vedanta Limited. It trades about -0.06 of its total potential returns per unit of risk. Vedanta Limited is currently generating about 0.03 per unit of volatility. If you would invest  45,110  in Vedanta Limited on December 27, 2024 and sell it today you would earn a total of  1,305  from holding Vedanta Limited or generate 2.89% return on investment over 90 days.

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

Sapphire Foods India  vs.  Vedanta Limited

Sapphire Foods India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sapphire Foods India has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Vedanta Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vedanta Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vedanta is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sapphire Foods and Vedanta

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

The idea behind Sapphire Foods India and Vedanta 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.