Correlation Between Parag Milk and Shaily Engineering

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

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

Diversification Opportunities for Parag Milk and Shaily Engineering

0.12

Correlation Coefficient

Parag Milk  Shaily Engineering

Average diversification

The 3 months correlation between Parag and Shaily is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Parag Milk Foods and Shaily Engineering Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaily Engineering and Parag Milk 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 Parag Milk Foods are associated (or correlated) with Shaily Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaily Engineering has no effect on the direction of Parag Milk i.e., Parag Milk and Shaily Engineering go up and down completely randomly.

Pair Corralation between Parag Milk and Shaily Engineering

Assuming the 90 days trading horizon Parag Milk is expected to generate 5.47 times less return on investment than Shaily Engineering. But when comparing it to its historical volatility, Parag Milk Foods is 2.04 times less risky than Shaily Engineering. It trades about 0.11 of its potential returns per unit of risk. Shaily Engineering Plastics is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  97,900  in Shaily Engineering Plastics on September 3, 2024 and sell it today you would earn a total of  31,835  from holding Shaily Engineering Plastics or generate 32.52% return on investment over 90 days.

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

Parag Milk Foods  vs.  Shaily Engineering Plastics

Parag Milk Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Parag Milk Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, Parag Milk may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shaily Engineering

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shaily Engineering Plastics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Shaily Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Parag Milk and Shaily Engineering

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

The idea behind Parag Milk Foods and Shaily Engineering Plastics 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.