Correlation Between V-Mart Retail and CEAT

Can any of the company-specific risk be diversified away by investing in both V-Mart Retail and CEAT 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 Retail and CEAT 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 CEAT Limited, you can compare the effects of market volatilities on V-Mart Retail and CEAT 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 Retail with a short position of CEAT. Check out your portfolio center. Please also check ongoing floating volatility patterns of V-Mart Retail and CEAT.

Diversification Opportunities for V-Mart Retail and CEAT

0.78

Correlation Coefficient

V-Mart Retail  CEAT

Poor diversification

The 3 months correlation between V-Mart and CEAT is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding V Mart Retail Limited and CEAT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEAT Limited and V-Mart Retail 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 CEAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEAT Limited has no effect on the direction of V-Mart Retail i.e., V-Mart Retail and CEAT go up and down completely randomly.

Pair Corralation between V-Mart Retail and CEAT

Assuming the 90 days trading horizon V Mart Retail Limited is expected to under-perform the CEAT. In addition to that, V-Mart Retail is 1.06 times more volatile than CEAT Limited. It trades about -0.18 of its total potential returns per unit of risk. CEAT Limited is currently generating about -0.04 per unit of volatility. If you would invest  306,770  in CEAT Limited on December 24, 2024 and sell it today you would lose (22,750) from holding CEAT Limited or give up 7.42% of portfolio value over 90 days.

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

V Mart Retail Limited  vs.  CEAT Limited

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.

CEAT Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days CEAT Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, CEAT is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with V-Mart Retail and CEAT

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

The idea behind V Mart Retail Limited and CEAT 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.