Correlation Between V-Mart Retail and Thermax

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

Diversification Opportunities for V-Mart Retail and Thermax

0.74

Correlation Coefficient

V-Mart Retail  Thermax

Poor diversification

The 3 months correlation between V-Mart and Thermax is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding V Mart Retail Limited and Thermax Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermax 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 Thermax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermax Limited has no effect on the direction of V-Mart Retail i.e., V-Mart Retail and Thermax go up and down completely randomly.

Pair Corralation between V-Mart Retail and Thermax

Assuming the 90 days trading horizon V Mart Retail Limited is expected to under-perform the Thermax. But the stock apears to be less risky and, when comparing its historical volatility, V Mart Retail Limited is 1.24 times less risky than Thermax. The stock trades about -0.17 of its potential returns per unit of risk. The Thermax Limited is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  442,200  in Thermax Limited on December 24, 2024 and sell it today you would lose (95,795) from holding Thermax Limited or give up 21.66% 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.  Thermax 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.

Thermax Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thermax Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with V-Mart Retail and Thermax

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

The idea behind V Mart Retail Limited and Thermax 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.