Correlation Between VA Tech and Servotech Power

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both VA Tech and Servotech Power 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 Servotech Power 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 Servotech Power Systems, you can compare the effects of market volatilities on VA Tech and Servotech Power 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 Servotech Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of VA Tech and Servotech Power.

Diversification Opportunities for VA Tech and Servotech Power

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between WABAG and Servotech is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding VA Tech Wabag and Servotech Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Servotech Power Systems 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 Servotech Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Servotech Power Systems has no effect on the direction of VA Tech i.e., VA Tech and Servotech Power go up and down completely randomly.

Pair Corralation between VA Tech and Servotech Power

Assuming the 90 days trading horizon VA Tech Wabag is expected to generate 1.19 times more return on investment than Servotech Power. However, VA Tech is 1.19 times more volatile than Servotech Power Systems. It trades about 0.05 of its potential returns per unit of risk. Servotech Power Systems is currently generating about -0.06 per unit of risk. If you would invest  153,800  in VA Tech Wabag on October 1, 2024 and sell it today you would earn a total of  10,945  from holding VA Tech Wabag or generate 7.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

VA Tech Wabag  vs.  Servotech Power Systems

 Performance 
       Timeline  
VA Tech Wabag 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in VA Tech Wabag are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental drivers, VA Tech may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Servotech Power Systems 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Servotech Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

VA Tech and Servotech Power Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with VA Tech and Servotech Power

The main advantage of trading using opposite VA Tech and Servotech Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VA Tech position performs unexpectedly, Servotech Power 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 Servotech Power will offset losses from the drop in Servotech Power's long position.
The idea behind VA Tech Wabag and Servotech Power Systems 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

Other Complementary Tools

Positions Ratings
Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance
Equity Valuation
Check real value of public entities based on technical and fundamental data
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Equity Forecasting
Use basic forecasting models to generate price predictions and determine price momentum
Crypto Correlations
Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins