Correlation Between Summit Securities and Vardhman Holdings

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

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

Diversification Opportunities for Summit Securities and Vardhman Holdings

0.98

Correlation Coefficient

Summit Securities  Vardhman Holdings

Almost no diversification

The 3 months correlation between Summit and Vardhman is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Summit Securities Limited and Vardhman Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vardhman Holdings and Summit Securities 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 Summit Securities Limited are associated (or correlated) with Vardhman Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vardhman Holdings has no effect on the direction of Summit Securities i.e., Summit Securities and Vardhman Holdings go up and down completely randomly.

Pair Corralation between Summit Securities and Vardhman Holdings

Assuming the 90 days trading horizon Summit Securities Limited is expected to under-perform the Vardhman Holdings. In addition to that, Summit Securities is 1.4 times more volatile than Vardhman Holdings Limited. It trades about -0.35 of its total potential returns per unit of risk. Vardhman Holdings Limited is currently generating about -0.33 per unit of volatility. If you would invest  483,490  in Vardhman Holdings Limited on December 1, 2024 and sell it today you would lose (188,190) from holding Vardhman Holdings Limited or give up 38.92% of portfolio value over 90 days.

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

Summit Securities Limited  vs.  Vardhman Holdings Limited

Summit Securities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Summit Securities Limited 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 basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Vardhman Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vardhman Holdings 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 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.

Pair Trading with Summit Securities and Vardhman Holdings

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

The idea behind Summit Securities Limited and Vardhman Holdings 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.