Correlation Between V2 Retail and Investment Trust

Can any of the company-specific risk be diversified away by investing in both V2 Retail and Investment Trust 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 V2 Retail and Investment Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between V2 Retail Limited and The Investment Trust, you can compare the effects of market volatilities on V2 Retail and Investment Trust 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 V2 Retail with a short position of Investment Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of V2 Retail and Investment Trust.

Diversification Opportunities for V2 Retail and Investment Trust

0.43

Correlation Coefficient

V2 Retail  Investment Trust

Very weak diversification

The 3 months correlation between V2RETAIL and Investment is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding V2 Retail Limited and The Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Trust and V2 Retail 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 V2 Retail Limited are associated (or correlated) with Investment Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Trust has no effect on the direction of V2 Retail i.e., V2 Retail and Investment Trust go up and down completely randomly.

Pair Corralation between V2 Retail and Investment Trust

Assuming the 90 days trading horizon V2 Retail Limited is expected to generate 1.07 times more return on investment than Investment Trust. However, V2 Retail is 1.07 times more volatile than The Investment Trust. It trades about 0.11 of its potential returns per unit of risk. The Investment Trust is currently generating about 0.07 per unit of risk. If you would invest  111,865  in V2 Retail Limited on September 3, 2024 and sell it today you would earn a total of  20,650  from holding V2 Retail Limited or generate 18.46% return on investment over 90 days.

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

V2 Retail Limited  vs.  The Investment Trust

V2 Retail Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in V2 Retail Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, V2 Retail demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Investment Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Investment Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Investment Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with V2 Retail and Investment Trust

The main advantage of trading using opposite V2 Retail and Investment Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if V2 Retail position performs unexpectedly, Investment Trust 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 Investment Trust will offset losses from the drop in Investment Trust's long position.

The idea behind V2 Retail Limited and The Investment Trust 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.