Correlation Between V Mart and JSW Steel

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

Diversification Opportunities for V Mart and JSW Steel

0.5

Correlation Coefficient

V Mart  JSW Steel

Very weak diversification

The 3 months correlation between VMART and JSW is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding V Mart Retail Limited and JSW Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSW Steel 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 JSW Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSW Steel Limited has no effect on the direction of V Mart i.e., V Mart and JSW Steel go up and down completely randomly.

Pair Corralation between V Mart and JSW Steel

Assuming the 90 days trading horizon V Mart Retail Limited is expected to under-perform the JSW Steel. In addition to that, V Mart is 2.03 times more volatile than JSW Steel Limited. It trades about -0.11 of its total potential returns per unit of risk. JSW Steel Limited is currently generating about -0.13 per unit of volatility. If you would invest  98,980  in JSW Steel Limited on October 8, 2024 and sell it today you would lose (7,475) from holding JSW Steel Limited or give up 7.55% of portfolio value over 90 days.

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

V Mart Retail Limited  vs.  JSW Steel 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.

JSW Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JSW Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with V Mart and JSW Steel

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

The idea behind V Mart Retail Limited and JSW Steel 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.