Correlation Between Thermax and V-Mart Retail

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

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

Diversification Opportunities for Thermax and V-Mart Retail

0.74

Correlation Coefficient

Thermax  V-Mart Retail

Poor diversification

The 3 months correlation between Thermax and V-Mart is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Thermax 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 Thermax 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 Thermax Limited are associated (or correlated) with V-Mart Retail. 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 Thermax i.e., Thermax and V-Mart Retail go up and down completely randomly.

Pair Corralation between Thermax and V-Mart Retail

Assuming the 90 days trading horizon Thermax Limited is expected to generate 1.24 times more return on investment than V-Mart Retail. However, Thermax is 1.24 times more volatile than V Mart Retail Limited. It trades about -0.11 of its potential returns per unit of risk. V Mart Retail Limited is currently generating about -0.17 per unit of risk. If you would invest  442,200  in Thermax Limited on December 24, 2024 and sell it today you would lose (95,795) from holding Thermax Limited or give up 21.66% of portfolio value over 90 days.

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

Thermax Limited  vs.  V Mart Retail Limited

Thermax Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thermax Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain fairly 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.

V Mart Retail

Risk-Adjusted Performance

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

Pair Trading with Thermax and V-Mart Retail

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

The idea behind Thermax 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.