Correlation Between V Mart and Servotech Power

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

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

Diversification Opportunities for V Mart and Servotech Power

0.33

Correlation Coefficient

V Mart  Servotech Power

Weak diversification

The 3 months correlation between VMART and Servotech is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding V Mart Retail Limited and Servotech Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Servotech Power Systems and V Mart 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 V Mart Retail Limited are associated (or correlated) with Servotech Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Servotech Power Systems has no effect on the direction of V Mart i.e., V Mart and Servotech Power go up and down completely randomly.

Pair Corralation between V Mart and Servotech Power

Assuming the 90 days trading horizon V Mart Retail Limited is expected to generate 0.98 times more return on investment than Servotech Power. However, V Mart Retail Limited is 1.02 times less risky than Servotech Power. It trades about 0.05 of its potential returns per unit of risk. Servotech Power Systems is currently generating about 0.01 per unit of risk. If you would invest  359,570  in V Mart Retail Limited on September 17, 2024 and sell it today you would earn a total of  24,055  from holding V Mart Retail Limited or generate 6.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

V Mart Retail Limited  vs.  Servotech Power Systems

V Mart Retail

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in V Mart Retail Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, V Mart may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Servotech Power Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Servotech Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Servotech Power is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with V Mart and Servotech Power

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

The idea behind V Mart Retail Limited and Servotech Power Systems 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.