Correlation Between Cantabil Retail and Parag Milk

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

By analyzing existing cross correlation between Cantabil Retail India and Parag Milk Foods, you can compare the effects of market volatilities on Cantabil Retail and Parag Milk 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 Cantabil Retail with a short position of Parag Milk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cantabil Retail and Parag Milk.

Diversification Opportunities for Cantabil Retail and Parag Milk

-0.04

Correlation Coefficient

Cantabil Retail  Parag Milk

Good diversification

The 3 months correlation between Cantabil and Parag is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Cantabil Retail India and Parag Milk Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parag Milk Foods and Cantabil 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 Cantabil Retail India are associated (or correlated) with Parag Milk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parag Milk Foods has no effect on the direction of Cantabil Retail i.e., Cantabil Retail and Parag Milk go up and down completely randomly.

Pair Corralation between Cantabil Retail and Parag Milk

Assuming the 90 days trading horizon Cantabil Retail is expected to generate 1.46 times less return on investment than Parag Milk. But when comparing it to its historical volatility, Cantabil Retail India is 1.37 times less risky than Parag Milk. It trades about 0.08 of its potential returns per unit of risk. Parag Milk Foods is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  18,110  in Parag Milk Foods on September 17, 2024 and sell it today you would earn a total of  2,609  from holding Parag Milk Foods or generate 14.41% return on investment over 90 days.

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

Cantabil Retail India  vs.  Parag Milk Foods

Cantabil Retail India

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cantabil Retail India are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental drivers, Cantabil Retail may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Parag Milk Foods

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Parag Milk Foods are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, Parag Milk demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cantabil Retail and Parag Milk

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

The idea behind Cantabil Retail India and Parag Milk Foods 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..