Correlation Between Vardhman Holdings and Gujarat Lease

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

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

Diversification Opportunities for Vardhman Holdings and Gujarat Lease

-0.01

Correlation Coefficient

Vardhman Holdings  Gujarat Lease

Good diversification

The 3 months correlation between Vardhman and Gujarat is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Vardhman Holdings Limited and Gujarat Lease Financing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Lease Financing and Vardhman Holdings 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 Vardhman Holdings Limited are associated (or correlated) with Gujarat Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Lease Financing has no effect on the direction of Vardhman Holdings i.e., Vardhman Holdings and Gujarat Lease go up and down completely randomly.

Pair Corralation between Vardhman Holdings and Gujarat Lease

Assuming the 90 days trading horizon Vardhman Holdings Limited is expected to generate 2.03 times more return on investment than Gujarat Lease. However, Vardhman Holdings is 2.03 times more volatile than Gujarat Lease Financing. It trades about 0.09 of its potential returns per unit of risk. Gujarat Lease Financing is currently generating about 0.14 per unit of risk. If you would invest  404,425  in Vardhman Holdings Limited on September 5, 2024 and sell it today you would earn a total of  87,755  from holding Vardhman Holdings Limited or generate 21.7% return on investment over 90 days.

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

Vardhman Holdings Limited  vs.  Gujarat Lease Financing

Vardhman Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vardhman Holdings Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Vardhman Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Gujarat Lease Financing

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Gujarat Lease unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vardhman Holdings and Gujarat Lease

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

The idea behind Vardhman Holdings Limited and Gujarat Lease Financing 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .