Correlation Between VA Tech and Sasken Technologies

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

Diversification Opportunities for VA Tech and Sasken Technologies

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between WABAG and Sasken is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding VA Tech Wabag and Sasken Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sasken Technologies 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 Sasken Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sasken Technologies has no effect on the direction of VA Tech i.e., VA Tech and Sasken Technologies go up and down completely randomly.

Pair Corralation between VA Tech and Sasken Technologies

Assuming the 90 days trading horizon VA Tech Wabag is expected to generate 1.1 times more return on investment than Sasken Technologies. However, VA Tech is 1.1 times more volatile than Sasken Technologies Limited. It trades about 0.13 of its potential returns per unit of risk. Sasken Technologies Limited is currently generating about 0.08 per unit of risk. If you would invest  33,160  in VA Tech Wabag on September 22, 2024 and sell it today you would earn a total of  128,980  from holding VA Tech Wabag or generate 388.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.59%
ValuesDaily Returns

VA Tech Wabag  vs.  Sasken Technologies Limited

 Performance 
       Timeline  
VA Tech Wabag 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in VA Tech Wabag are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental drivers, VA Tech may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Sasken Technologies 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sasken Technologies Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating forward-looking signals, Sasken Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

VA Tech and Sasken Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with VA Tech and Sasken Technologies

The main advantage of trading using opposite VA Tech and Sasken Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VA Tech position performs unexpectedly, Sasken Technologies 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 Sasken Technologies will offset losses from the drop in Sasken Technologies' long position.
The idea behind VA Tech Wabag and Sasken Technologies 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.
Check out your portfolio center.
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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