Correlation Between V Mart and TVS Electronics

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

Diversification Opportunities for V Mart and TVS Electronics

0.3

Correlation Coefficient

V Mart  TVS Electronics

Weak diversification

The 3 months correlation between VMART and TVS is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding V Mart Retail Limited and TVS Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TVS Electronics 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 TVS Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TVS Electronics has no effect on the direction of V Mart i.e., V Mart and TVS Electronics go up and down completely randomly.

Pair Corralation between V Mart and TVS Electronics

Assuming the 90 days trading horizon V Mart Retail Limited is expected to under-perform the TVS Electronics. In addition to that, V Mart is 1.02 times more volatile than TVS Electronics Limited. It trades about -0.1 of its total potential returns per unit of risk. TVS Electronics Limited is currently generating about 0.06 per unit of volatility. If you would invest  39,230  in TVS Electronics Limited on October 8, 2024 and sell it today you would earn a total of  3,060  from holding TVS Electronics Limited or generate 7.8% return on investment over 90 days.

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

V Mart Retail Limited  vs.  TVS Electronics 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.

TVS Electronics

Risk-Adjusted Performance

4 of 100

Modest

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

Pair Trading with V Mart and TVS Electronics

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

The idea behind V Mart Retail Limited and TVS Electronics 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.