Correlation Between VIP Clothing and Golden Tobacco

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

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

Diversification Opportunities for VIP Clothing and Golden Tobacco

0.18

Correlation Coefficient

VIP Clothing  Golden Tobacco

Average diversification

The 3 months correlation between VIP and Golden is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding VIP Clothing Limited and Golden Tobacco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Tobacco and VIP Clothing 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 VIP Clothing Limited are associated (or correlated) with Golden Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Tobacco has no effect on the direction of VIP Clothing i.e., VIP Clothing and Golden Tobacco go up and down completely randomly.

Pair Corralation between VIP Clothing and Golden Tobacco

Assuming the 90 days trading horizon VIP Clothing Limited is expected to under-perform the Golden Tobacco. In addition to that, VIP Clothing is 1.05 times more volatile than Golden Tobacco Limited. It trades about -0.17 of its total potential returns per unit of risk. Golden Tobacco Limited is currently generating about -0.02 per unit of volatility. If you would invest  4,000  in Golden Tobacco Limited on December 4, 2024 and sell it today you would lose (301.00) from holding Golden Tobacco Limited or give up 7.52% of portfolio value over 90 days.

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

VIP Clothing Limited  vs.  Golden Tobacco Limited

VIP Clothing Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days VIP Clothing 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 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.

Golden Tobacco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golden Tobacco Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Golden Tobacco is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with VIP Clothing and Golden Tobacco

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

The idea behind VIP Clothing Limited and Golden Tobacco 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.