Correlation Between VETIVA SUMER and VETIVA BANKING

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

By analyzing existing cross correlation between VETIVA SUMER GOODS and VETIVA BANKING ETF, you can compare the effects of market volatilities on VETIVA SUMER and VETIVA BANKING 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 VETIVA SUMER with a short position of VETIVA BANKING. Check out your portfolio center. Please also check ongoing floating volatility patterns of VETIVA SUMER and VETIVA BANKING.

Diversification Opportunities for VETIVA SUMER and VETIVA BANKING

0.9

Correlation Coefficient

VETIVA SUMER  VETIVA BANKING

Almost no diversification

The 3 months correlation between VETIVA and VETIVA is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding VETIVA SUMER GOODS and VETIVA BANKING ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VETIVA BANKING ETF and VETIVA SUMER 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 VETIVA SUMER GOODS are associated (or correlated) with VETIVA BANKING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VETIVA BANKING ETF has no effect on the direction of VETIVA SUMER i.e., VETIVA SUMER and VETIVA BANKING go up and down completely randomly.

Pair Corralation between VETIVA SUMER and VETIVA BANKING

Assuming the 90 days trading horizon VETIVA SUMER is expected to generate 1.4 times less return on investment than VETIVA BANKING. But when comparing it to its historical volatility, VETIVA SUMER GOODS is 2.18 times less risky than VETIVA BANKING. It trades about 0.27 of its potential returns per unit of risk. VETIVA BANKING ETF is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,035  in VETIVA BANKING ETF on December 27, 2024 and sell it today you would earn a total of  235.00  from holding VETIVA BANKING ETF or generate 22.71% return on investment over 90 days.

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

VETIVA SUMER GOODS  vs.  VETIVA BANKING ETF

VETIVA SUMER GOODS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VETIVA SUMER GOODS are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, VETIVA SUMER exhibited solid returns over the last few months and may actually be approaching a breakup point.

VETIVA BANKING ETF

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VETIVA BANKING ETF are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, VETIVA BANKING disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VETIVA SUMER and VETIVA BANKING

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

The idea behind VETIVA SUMER GOODS and VETIVA BANKING ETF 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.