Correlation Between Gujarat Lease and V Mart

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

By analyzing existing cross correlation between Gujarat Lease Financing and V Mart Retail Limited, you can compare the effects of market volatilities on Gujarat Lease and V Mart 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 Gujarat Lease with a short position of V Mart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gujarat Lease and V Mart.

Diversification Opportunities for Gujarat Lease and V Mart

0.12

Correlation Coefficient

Gujarat Lease  V Mart

Average diversification

The 3 months correlation between Gujarat and VMART is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Lease Financing and V Mart Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on V Mart Retail and Gujarat Lease 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 Gujarat Lease Financing are associated (or correlated) with V Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of V Mart Retail has no effect on the direction of Gujarat Lease i.e., Gujarat Lease and V Mart go up and down completely randomly.

Pair Corralation between Gujarat Lease and V Mart

Assuming the 90 days trading horizon Gujarat Lease is expected to generate 2.3 times less return on investment than V Mart. But when comparing it to its historical volatility, Gujarat Lease Financing is 1.34 times less risky than V Mart. It trades about 0.03 of its potential returns per unit of risk. V Mart Retail Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  366,535  in V Mart Retail Limited on September 2, 2024 and sell it today you would earn a total of  28,865  from holding V Mart Retail Limited or generate 7.88% return on investment over 90 days.

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

Gujarat Lease Financing  vs.  V Mart Retail Limited

Gujarat Lease Financing

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Gujarat Lease is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

V Mart Retail

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in V Mart Retail Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, V Mart may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gujarat Lease and V Mart

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

The idea behind Gujarat Lease Financing and V Mart Retail 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.