Correlation Between Vats Liquor and NBTM New

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

By analyzing existing cross correlation between Vats Liquor Chain and NBTM New Materials, you can compare the effects of market volatilities on Vats Liquor and NBTM New 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 Vats Liquor with a short position of NBTM New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vats Liquor and NBTM New.

Diversification Opportunities for Vats Liquor and NBTM New

0.56

Correlation Coefficient

Vats Liquor  NBTM New

Very weak diversification

The 3 months correlation between Vats and NBTM is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Vats Liquor Chain and NBTM New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBTM New Materials and Vats Liquor 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 Vats Liquor Chain are associated (or correlated) with NBTM New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBTM New Materials has no effect on the direction of Vats Liquor i.e., Vats Liquor and NBTM New go up and down completely randomly.

Pair Corralation between Vats Liquor and NBTM New

Assuming the 90 days trading horizon Vats Liquor Chain is expected to under-perform the NBTM New. But the stock apears to be less risky and, when comparing its historical volatility, Vats Liquor Chain is 1.09 times less risky than NBTM New. The stock trades about -0.02 of its potential returns per unit of risk. The NBTM New Materials is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  897.00  in NBTM New Materials on September 29, 2024 and sell it today you would earn a total of  809.00  from holding NBTM New Materials or generate 90.19% return on investment over 90 days.

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

Vats Liquor Chain  vs.  NBTM New Materials

Vats Liquor Chain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vats Liquor Chain has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Vats Liquor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NBTM New Materials

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NBTM New Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NBTM New may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vats Liquor and NBTM New

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

The idea behind Vats Liquor Chain and NBTM New Materials 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.