Correlation Between VA Tech and Gokul Refoils

Can any of the company-specific risk be diversified away by investing in both VA Tech and Gokul Refoils 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 VA Tech and Gokul Refoils into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VA Tech Wabag and Gokul Refoils and, you can compare the effects of market volatilities on VA Tech and Gokul Refoils 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 VA Tech with a short position of Gokul Refoils. Check out your portfolio center. Please also check ongoing floating volatility patterns of VA Tech and Gokul Refoils.

Diversification Opportunities for VA Tech and Gokul Refoils

0.23

Correlation Coefficient

VA Tech  Gokul Refoils

Modest diversification

The 3 months correlation between WABAG and Gokul is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding VA Tech Wabag and Gokul Refoils and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gokul Refoils and VA Tech 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 VA Tech Wabag are associated (or correlated) with Gokul Refoils. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gokul Refoils has no effect on the direction of VA Tech i.e., VA Tech and Gokul Refoils go up and down completely randomly.

Pair Corralation between VA Tech and Gokul Refoils

Assuming the 90 days trading horizon VA Tech Wabag is expected to generate 1.3 times more return on investment than Gokul Refoils. However, VA Tech is 1.3 times more volatile than Gokul Refoils and. It trades about 0.12 of its potential returns per unit of risk. Gokul Refoils and is currently generating about 0.1 per unit of risk. If you would invest  79,990  in VA Tech Wabag on October 12, 2024 and sell it today you would earn a total of  70,660  from holding VA Tech Wabag or generate 88.34% return on investment over 90 days.

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

VA Tech Wabag  vs.  Gokul Refoils and

VA Tech Wabag

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VA Tech Wabag has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Gokul Refoils

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gokul Refoils and are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward-looking signals, Gokul Refoils displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VA Tech and Gokul Refoils

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

The idea behind VA Tech Wabag and Gokul Refoils and 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.