Correlation Between Patanjali Foods and Shaily Engineering

Can any of the company-specific risk be diversified away by investing in both Patanjali Foods 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 Patanjali Foods and Shaily Engineering 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 Shaily Engineering Plastics, you can compare the effects of market volatilities on Patanjali Foods 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 Patanjali Foods with a short position of Shaily Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patanjali Foods and Shaily Engineering.

Diversification Opportunities for Patanjali Foods and Shaily Engineering

0.21

Correlation Coefficient

Patanjali Foods  Shaily Engineering

Modest diversification

The 3 months correlation between Patanjali and Shaily is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Patanjali Foods Limited and Shaily Engineering Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaily Engineering 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 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 Patanjali Foods i.e., Patanjali Foods and Shaily Engineering go up and down completely randomly.

Pair Corralation between Patanjali Foods and Shaily Engineering

Assuming the 90 days trading horizon Patanjali Foods Limited is expected to under-perform the Shaily Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Patanjali Foods Limited is 1.82 times less risky than Shaily Engineering. The stock trades about -0.06 of its potential returns per unit of risk. The Shaily Engineering Plastics is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  102,795  in Shaily Engineering Plastics on August 31, 2024 and sell it today you would earn a total of  26,505  from holding Shaily Engineering Plastics or generate 25.78% return on investment over 90 days.

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

Patanjali Foods Limited  vs.  Shaily Engineering Plastics

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 latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 unsteady forward indicators, Shaily Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Patanjali Foods and Shaily Engineering

The main advantage of trading using opposite Patanjali Foods and Shaily Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patanjali Foods 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 Patanjali Foods Limited 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.