Correlation Between Speciality Restaurants and V Mart

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

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

Diversification Opportunities for Speciality Restaurants and V Mart

0.7

Correlation Coefficient

Speciality Restaurants  V Mart

Poor diversification

The 3 months correlation between Speciality and VMART is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Speciality Restaurants Limited 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 Speciality Restaurants 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 Speciality Restaurants Limited 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 Speciality Restaurants i.e., Speciality Restaurants and V Mart go up and down completely randomly.

Pair Corralation between Speciality Restaurants and V Mart

Assuming the 90 days trading horizon Speciality Restaurants Limited is expected to generate 0.73 times more return on investment than V Mart. However, Speciality Restaurants Limited is 1.37 times less risky than V Mart. It trades about -0.13 of its potential returns per unit of risk. V Mart Retail Limited is currently generating about -0.11 per unit of risk. If you would invest  16,930  in Speciality Restaurants Limited on October 9, 2024 and sell it today you would lose (2,517) from holding Speciality Restaurants Limited or give up 14.87% of portfolio value over 90 days.

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

Speciality Restaurants Limited  vs.  V Mart Retail Limited

Speciality Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Speciality Restaurants Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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 unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Speciality Restaurants and V Mart

The main advantage of trading using opposite Speciality Restaurants and V Mart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Speciality Restaurants 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 Speciality Restaurants Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.