Correlation Between Sarthak Metals and VA Tech

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

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

Diversification Opportunities for Sarthak Metals and VA Tech

-0.27

Correlation Coefficient

Sarthak Metals  VA Tech

Very good diversification

The 3 months correlation between Sarthak and WABAG is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sarthak Metals Limited and VA Tech Wabag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VA Tech Wabag and Sarthak Metals 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 Sarthak Metals Limited are associated (or correlated) with VA Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VA Tech Wabag has no effect on the direction of Sarthak Metals i.e., Sarthak Metals and VA Tech go up and down completely randomly.

Pair Corralation between Sarthak Metals and VA Tech

Assuming the 90 days trading horizon Sarthak Metals Limited is expected to under-perform the VA Tech. But the stock apears to be less risky and, when comparing its historical volatility, Sarthak Metals Limited is 1.01 times less risky than VA Tech. The stock trades about -0.05 of its potential returns per unit of risk. The VA Tech Wabag is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  146,825  in VA Tech Wabag on September 26, 2024 and sell it today you would earn a total of  13,325  from holding VA Tech Wabag or generate 9.08% return on investment over 90 days.

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

Sarthak Metals Limited  vs.  VA Tech Wabag

Sarthak Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarthak Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

VA Tech Wabag

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Sarthak Metals and VA Tech

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

The idea behind Sarthak Metals Limited and VA Tech Wabag 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.