Correlation Between V Mart and JM Financial

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

Diversification Opportunities for V Mart and JM Financial

0.67

Correlation Coefficient

V Mart  JM Financial

Poor diversification

The 3 months correlation between VMART and JMFINANCIL is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding V Mart Retail Limited and JM Financial Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JM Financial 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 JM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JM Financial Limited has no effect on the direction of V Mart i.e., V Mart and JM Financial go up and down completely randomly.

Pair Corralation between V Mart and JM Financial

Assuming the 90 days trading horizon V Mart Retail Limited is expected to under-perform the JM Financial. In addition to that, V Mart is 1.39 times more volatile than JM Financial Limited. It trades about -0.08 of its total potential returns per unit of risk. JM Financial Limited is currently generating about -0.05 per unit of volatility. If you would invest  13,836  in JM Financial Limited on September 22, 2024 and sell it today you would lose (742.00) from holding JM Financial Limited or give up 5.36% 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.  JM Financial 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 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.

JM Financial Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JM Financial Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, JM Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with V Mart and JM Financial

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

The idea behind V Mart Retail Limited and JM Financial 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.