Correlation Between Patanjali Foods and PSP Projects

Can any of the company-specific risk be diversified away by investing in both Patanjali Foods and PSP Projects 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 Patanjali Foods and PSP Projects into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Patanjali Foods Limited and PSP Projects Limited, you can compare the effects of market volatilities on Patanjali Foods and PSP Projects 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 Patanjali Foods with a short position of PSP Projects. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patanjali Foods and PSP Projects.

Diversification Opportunities for Patanjali Foods and PSP Projects

0.13

Correlation Coefficient

Patanjali Foods  PSP Projects

Average diversification

The 3 months correlation between Patanjali and PSP is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Patanjali Foods Limited and PSP Projects Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSP Projects Limited and Patanjali Foods 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 Patanjali Foods Limited are associated (or correlated) with PSP Projects. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSP Projects Limited has no effect on the direction of Patanjali Foods i.e., Patanjali Foods and PSP Projects go up and down completely randomly.

Pair Corralation between Patanjali Foods and PSP Projects

Assuming the 90 days trading horizon Patanjali Foods Limited is expected to under-perform the PSP Projects. But the stock apears to be less risky and, when comparing its historical volatility, Patanjali Foods Limited is 1.16 times less risky than PSP Projects. The stock trades about -0.02 of its potential returns per unit of risk. The PSP Projects Limited is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  67,295  in PSP Projects Limited on September 12, 2024 and sell it today you would lose (2,010) from holding PSP Projects Limited or give up 2.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Patanjali Foods Limited  vs.  PSP Projects Limited

Patanjali Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Patanjali Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Patanjali Foods is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

PSP Projects Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PSP Projects Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady technical and fundamental indicators, PSP Projects is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Patanjali Foods and PSP Projects

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

The idea behind Patanjali Foods Limited and PSP Projects Limited 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.