Correlation Between Parag Milk and S P

Can any of the company-specific risk be diversified away by investing in both Parag Milk and S P 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 S P 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 S P Apparels, you can compare the effects of market volatilities on Parag Milk and S P 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 S P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parag Milk and S P.

Diversification Opportunities for Parag Milk and S P

-0.3

Correlation Coefficient

Parag Milk  S P

Very good diversification

The 3 months correlation between Parag and SPAL is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Parag Milk Foods and S P Apparels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S P Apparels 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 S P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S P Apparels has no effect on the direction of Parag Milk i.e., Parag Milk and S P go up and down completely randomly.

Pair Corralation between Parag Milk and S P

Assuming the 90 days trading horizon Parag Milk Foods is expected to generate 1.19 times more return on investment than S P. However, Parag Milk is 1.19 times more volatile than S P Apparels. It trades about 0.09 of its potential returns per unit of risk. S P Apparels is currently generating about -0.01 per unit of risk. 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

Parag Milk Foods  vs.  S P Apparels

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.

S P Apparels

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Parag Milk and S P

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

The idea behind Parag Milk Foods and S P Apparels 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.