Correlation Between Sarthak Metals and Vodafone Idea

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

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

Diversification Opportunities for Sarthak Metals and Vodafone Idea

0.33

Correlation Coefficient

Sarthak Metals  Vodafone Idea

Weak diversification

The 3 months correlation between Sarthak and Vodafone is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sarthak Metals Limited and Vodafone Idea Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Idea Limited and Sarthak Metals 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 Sarthak Metals Limited are associated (or correlated) with Vodafone Idea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Idea Limited has no effect on the direction of Sarthak Metals i.e., Sarthak Metals and Vodafone Idea go up and down completely randomly.

Pair Corralation between Sarthak Metals and Vodafone Idea

Assuming the 90 days trading horizon Sarthak Metals Limited is expected to under-perform the Vodafone Idea. But the stock apears to be less risky and, when comparing its historical volatility, Sarthak Metals Limited is 1.19 times less risky than Vodafone Idea. The stock trades about -0.03 of its potential returns per unit of risk. The Vodafone Idea Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  825.00  in Vodafone Idea Limited on October 23, 2024 and sell it today you would earn a total of  169.00  from holding Vodafone Idea Limited or generate 20.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Sarthak Metals Limited  vs.  Vodafone Idea Limited

Sarthak Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarthak Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sarthak Metals is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Vodafone Idea Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vodafone Idea Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Vodafone Idea unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sarthak Metals and Vodafone Idea

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

The idea behind Sarthak Metals Limited and Vodafone Idea 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.