Correlation Between Yatra Online and Vedanta

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

By analyzing existing cross correlation between Yatra Online Limited and Vedanta Limited, you can compare the effects of market volatilities on Yatra Online and Vedanta 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 Yatra Online with a short position of Vedanta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yatra Online and Vedanta.

Diversification Opportunities for Yatra Online and Vedanta

0.39

Correlation Coefficient

Yatra Online  Vedanta

Weak diversification

The 3 months correlation between Yatra and Vedanta is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Yatra Online Limited and Vedanta Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vedanta Limited and Yatra Online 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 Yatra Online Limited are associated (or correlated) with Vedanta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vedanta Limited has no effect on the direction of Yatra Online i.e., Yatra Online and Vedanta go up and down completely randomly.

Pair Corralation between Yatra Online and Vedanta

Assuming the 90 days trading horizon Yatra Online Limited is expected to under-perform the Vedanta. But the stock apears to be less risky and, when comparing its historical volatility, Yatra Online Limited is 1.02 times less risky than Vedanta. The stock trades about -0.17 of its potential returns per unit of risk. The Vedanta Limited is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  46,470  in Vedanta Limited on October 24, 2024 and sell it today you would lose (1,080) from holding Vedanta Limited or give up 2.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Yatra Online Limited  vs.  Vedanta Limited

Yatra Online Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yatra Online Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Yatra Online is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Vedanta Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vedanta Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vedanta is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Yatra Online and Vedanta

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

The idea behind Yatra Online Limited and Vedanta 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.