Correlation Between VA Tech and Vardhman Holdings

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

Diversification Opportunities for VA Tech and Vardhman Holdings

0.54

Correlation Coefficient

VA Tech  Vardhman Holdings

Very weak diversification

The 3 months correlation between WABAG and Vardhman is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding VA Tech Wabag and Vardhman Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vardhman Holdings 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 Vardhman Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vardhman Holdings has no effect on the direction of VA Tech i.e., VA Tech and Vardhman Holdings go up and down completely randomly.

Pair Corralation between VA Tech and Vardhman Holdings

Assuming the 90 days trading horizon VA Tech Wabag is expected to under-perform the Vardhman Holdings. In addition to that, VA Tech is 1.81 times more volatile than Vardhman Holdings Limited. It trades about -0.19 of its total potential returns per unit of risk. Vardhman Holdings Limited is currently generating about -0.27 per unit of volatility. If you would invest  496,985  in Vardhman Holdings Limited on October 8, 2024 and sell it today you would lose (43,855) from holding Vardhman Holdings Limited or give up 8.82% of portfolio value over 90 days.

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

VA Tech Wabag  vs.  Vardhman Holdings Limited

VA Tech Wabag

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VA Tech Wabag are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, VA Tech displayed solid returns over the last few months and may actually be approaching a breakup point.

Vardhman Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vardhman Holdings Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Vardhman Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VA Tech and Vardhman Holdings

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

The idea behind VA Tech Wabag and Vardhman Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.