Correlation Between Teamlease Services and VA Tech

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

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

Diversification Opportunities for Teamlease Services and VA Tech

0.31

Correlation Coefficient

Teamlease Services  VA Tech

Weak diversification

The 3 months correlation between Teamlease and WABAG is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Teamlease Services Limited 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 Teamlease Services 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 Teamlease Services Limited 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 Teamlease Services i.e., Teamlease Services and VA Tech go up and down completely randomly.

Pair Corralation between Teamlease Services and VA Tech

Assuming the 90 days trading horizon Teamlease Services is expected to generate 8.09 times less return on investment than VA Tech. But when comparing it to its historical volatility, Teamlease Services Limited is 1.47 times less risky than VA Tech. It trades about 0.02 of its potential returns per unit of risk. VA Tech Wabag is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  32,395  in VA Tech Wabag on October 26, 2024 and sell it today you would earn a total of  100,810  from holding VA Tech Wabag or generate 311.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Teamlease Services Limited  vs.  VA Tech Wabag

Teamlease Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teamlease Services Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Teamlease Services is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

VA Tech Wabag

Risk-Adjusted Performance

0 of 100

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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Teamlease Services and VA Tech

The main advantage of trading using opposite Teamlease Services and VA Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teamlease Services 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 Teamlease Services Limited 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.