Correlation Between ShippingOf India and VA Tech

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

By analyzing existing cross correlation between Shipping and VA Tech Wabag, you can compare the effects of market volatilities on ShippingOf India and VA Tech 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 ShippingOf India with a short position of VA Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of ShippingOf India and VA Tech.

Diversification Opportunities for ShippingOf India and VA Tech

0.86

Correlation Coefficient

ShippingOf India  VA Tech

Very poor diversification

The 3 months correlation between ShippingOf and WABAG is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Shipping and VA Tech Wabag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VA Tech Wabag and ShippingOf India 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 Shipping are associated (or correlated) with VA Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VA Tech Wabag has no effect on the direction of ShippingOf India i.e., ShippingOf India and VA Tech go up and down completely randomly.

Pair Corralation between ShippingOf India and VA Tech

Assuming the 90 days trading horizon ShippingOf India is expected to generate 3.76 times less return on investment than VA Tech. In addition to that, ShippingOf India is 1.13 times more volatile than VA Tech Wabag. It trades about 0.03 of its total potential returns per unit of risk. VA Tech Wabag is currently generating about 0.11 per unit of volatility. If you would invest  32,595  in VA Tech Wabag on December 2, 2024 and sell it today you would earn a total of  97,755  from holding VA Tech Wabag or generate 299.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Shipping  vs.  VA Tech Wabag

ShippingOf India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

VA Tech Wabag

Risk-Adjusted Performance

Very Weak

Over the last 90 days VA Tech Wabag has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with ShippingOf India and VA Tech

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

The idea behind Shipping and VA Tech Wabag 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.