Correlation Between Vodafone Idea and Indian Metals

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

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

Diversification Opportunities for Vodafone Idea and Indian Metals

-0.58

Correlation Coefficient

Vodafone Idea  Indian Metals

Excellent diversification

The 3 months correlation between Vodafone and Indian is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Idea Limited and Indian Metals Ferro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Metals Ferro and Vodafone Idea 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 Vodafone Idea Limited are associated (or correlated) with Indian Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Metals Ferro has no effect on the direction of Vodafone Idea i.e., Vodafone Idea and Indian Metals go up and down completely randomly.

Pair Corralation between Vodafone Idea and Indian Metals

Assuming the 90 days trading horizon Vodafone Idea Limited is expected to under-perform the Indian Metals. In addition to that, Vodafone Idea is 1.76 times more volatile than Indian Metals Ferro. It trades about -0.19 of its total potential returns per unit of risk. Indian Metals Ferro is currently generating about 0.22 per unit of volatility. If you would invest  63,785  in Indian Metals Ferro on September 4, 2024 and sell it today you would earn a total of  23,325  from holding Indian Metals Ferro or generate 36.57% return on investment over 90 days.

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

Vodafone Idea Limited  vs.  Indian Metals Ferro

Vodafone Idea Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodafone Idea Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Indian Metals Ferro

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vodafone Idea and Indian Metals

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

The idea behind Vodafone Idea Limited and Indian Metals Ferro 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.