Correlation Between V Mart and Associated Alcohols

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

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

Diversification Opportunities for V Mart and Associated Alcohols

-0.23

Correlation Coefficient

V Mart  Associated Alcohols

Very good diversification

The 3 months correlation between VMART and Associated is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding V Mart Retail Limited and Associated Alcohols Breweries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated Alcohols and V Mart 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 V Mart Retail Limited are associated (or correlated) with Associated Alcohols. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated Alcohols has no effect on the direction of V Mart i.e., V Mart and Associated Alcohols go up and down completely randomly.

Pair Corralation between V Mart and Associated Alcohols

Assuming the 90 days trading horizon V Mart is expected to generate 2.21 times less return on investment than Associated Alcohols. But when comparing it to its historical volatility, V Mart Retail Limited is 1.08 times less risky than Associated Alcohols. It trades about 0.2 of its potential returns per unit of risk. Associated Alcohols Breweries is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  91,075  in Associated Alcohols Breweries on September 21, 2024 and sell it today you would earn a total of  20,645  from holding Associated Alcohols Breweries or generate 22.67% return on investment over 90 days.

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

V Mart Retail Limited  vs.  Associated Alcohols Breweries

V Mart Retail

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, V Mart is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Associated Alcohols

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Associated Alcohols reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with V Mart and Associated Alcohols

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

The idea behind V Mart Retail Limited and Associated Alcohols Breweries 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.