Correlation Between V Mart and Dodla Dairy

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

Diversification Opportunities for V Mart and Dodla Dairy

0.11

Correlation Coefficient

V Mart  Dodla Dairy

Average diversification

The 3 months correlation between VMART and Dodla is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding V Mart Retail Limited and Dodla Dairy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodla Dairy Limited 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 Dodla Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodla Dairy Limited has no effect on the direction of V Mart i.e., V Mart and Dodla Dairy go up and down completely randomly.

Pair Corralation between V Mart and Dodla Dairy

Assuming the 90 days trading horizon V Mart Retail Limited is expected to generate 1.03 times more return on investment than Dodla Dairy. However, V Mart is 1.03 times more volatile than Dodla Dairy Limited. It trades about 0.13 of its potential returns per unit of risk. Dodla Dairy Limited is currently generating about 0.08 per unit of risk. If you would invest  210,330  in V Mart Retail Limited on October 8, 2024 and sell it today you would earn a total of  152,560  from holding V Mart Retail Limited or generate 72.53% return on investment over 90 days.

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

V Mart Retail Limited  vs.  Dodla Dairy Limited

V Mart Retail

Risk-Adjusted Performance

0 of 100

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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Dodla Dairy Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dodla Dairy Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Dodla Dairy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with V Mart and Dodla Dairy

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

The idea behind V Mart Retail Limited and Dodla Dairy 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.