Correlation Between VIP Clothing and Rama Steel

Can any of the company-specific risk be diversified away by investing in both VIP Clothing and Rama Steel 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 VIP Clothing and Rama Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VIP Clothing Limited and Rama Steel Tubes, you can compare the effects of market volatilities on VIP Clothing and Rama Steel 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 VIP Clothing with a short position of Rama Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of VIP Clothing and Rama Steel.

Diversification Opportunities for VIP Clothing and Rama Steel

0.67

Correlation Coefficient

VIP Clothing  Rama Steel

Poor diversification

The 3 months correlation between VIP and Rama is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding VIP Clothing Limited and Rama Steel Tubes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rama Steel Tubes and VIP Clothing 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 VIP Clothing Limited are associated (or correlated) with Rama Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rama Steel Tubes has no effect on the direction of VIP Clothing i.e., VIP Clothing and Rama Steel go up and down completely randomly.

Pair Corralation between VIP Clothing and Rama Steel

Assuming the 90 days trading horizon VIP Clothing is expected to generate 1.92 times less return on investment than Rama Steel. But when comparing it to its historical volatility, VIP Clothing Limited is 1.23 times less risky than Rama Steel. It trades about 0.04 of its potential returns per unit of risk. Rama Steel Tubes is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,044  in Rama Steel Tubes on April 24, 2025 and sell it today you would earn a total of  114.00  from holding Rama Steel Tubes or generate 10.92% return on investment over 90 days.

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

VIP Clothing Limited  vs.  Rama Steel Tubes

VIP Clothing Limited

Risk-Adjusted Performance

Insignificant

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

Rama Steel Tubes

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rama Steel Tubes are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Rama Steel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VIP Clothing and Rama Steel

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

The idea behind VIP Clothing Limited and Rama Steel Tubes 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.