Correlation Between Suzlon Energy and Vodafone Idea

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

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

Diversification Opportunities for Suzlon Energy and Vodafone Idea

-0.47

Correlation Coefficient

Suzlon Energy  Vodafone Idea

Very good diversification

The 3 months correlation between Suzlon and Vodafone is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Suzlon Energy 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 Suzlon Energy 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 Suzlon Energy 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 Suzlon Energy i.e., Suzlon Energy and Vodafone Idea go up and down completely randomly.

Pair Corralation between Suzlon Energy and Vodafone Idea

Assuming the 90 days trading horizon Suzlon Energy Limited is expected to under-perform the Vodafone Idea. But the stock apears to be less risky and, when comparing its historical volatility, Suzlon Energy Limited is 1.06 times less risky than Vodafone Idea. The stock trades about -0.16 of its potential returns per unit of risk. The Vodafone Idea Limited is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  828.00  in Vodafone Idea Limited on December 1, 2024 and sell it today you would lose (73.00) from holding Vodafone Idea Limited or give up 8.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Suzlon Energy Limited  vs.  Vodafone Idea Limited

Suzlon Energy Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Suzlon Energy 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 essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Vodafone Idea Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vodafone Idea Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Suzlon Energy and Vodafone Idea

The main advantage of trading using opposite Suzlon Energy and Vodafone Idea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suzlon Energy 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 Suzlon Energy 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.