Correlation Between VA Tech and Shivalik Bimetal

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

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

Diversification Opportunities for VA Tech and Shivalik Bimetal

0.35

Correlation Coefficient

VA Tech  Shivalik Bimetal

Weak diversification

The 3 months correlation between WABAG and Shivalik is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding VA Tech Wabag and Shivalik Bimetal Controls in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shivalik Bimetal Controls and VA Tech 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 VA Tech Wabag are associated (or correlated) with Shivalik Bimetal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shivalik Bimetal Controls has no effect on the direction of VA Tech i.e., VA Tech and Shivalik Bimetal go up and down completely randomly.

Pair Corralation between VA Tech and Shivalik Bimetal

Assuming the 90 days trading horizon VA Tech Wabag is expected to generate 0.98 times more return on investment than Shivalik Bimetal. However, VA Tech Wabag is 1.02 times less risky than Shivalik Bimetal. It trades about 0.17 of its potential returns per unit of risk. Shivalik Bimetal Controls is currently generating about -0.23 per unit of risk. If you would invest  172,810  in VA Tech Wabag on September 5, 2024 and sell it today you would earn a total of  13,395  from holding VA Tech Wabag or generate 7.75% return on investment over 90 days.

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

VA Tech Wabag  vs.  Shivalik Bimetal Controls

VA Tech Wabag

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VA Tech Wabag are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental drivers, VA Tech displayed solid returns over the last few months and may actually be approaching a breakup point.

Shivalik Bimetal Controls

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shivalik Bimetal Controls has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Shivalik Bimetal is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with VA Tech and Shivalik Bimetal

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

The idea behind VA Tech Wabag and Shivalik Bimetal Controls 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.