Correlation Between Varun Beverages and Cambridge Technology

Can any of the company-specific risk be diversified away by investing in both Varun Beverages and Cambridge Technology 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 Varun Beverages and Cambridge Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Varun Beverages Limited and Cambridge Technology Enterprises, you can compare the effects of market volatilities on Varun Beverages and Cambridge Technology 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 Varun Beverages with a short position of Cambridge Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Varun Beverages and Cambridge Technology.

Diversification Opportunities for Varun Beverages and Cambridge Technology

0.12

Correlation Coefficient

Varun Beverages  Cambridge Technology

Average diversification

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

Pair Corralation between Varun Beverages and Cambridge Technology

Assuming the 90 days trading horizon Varun Beverages Limited is expected to generate 6.02 times more return on investment than Cambridge Technology. However, Varun Beverages is 6.02 times more volatile than Cambridge Technology Enterprises. It trades about 0.06 of its potential returns per unit of risk. Cambridge Technology Enterprises is currently generating about 0.05 per unit of risk. If you would invest  25,816  in Varun Beverages Limited on September 24, 2024 and sell it today you would earn a total of  35,439  from holding Varun Beverages Limited or generate 137.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Varun Beverages Limited  vs.  Cambridge Technology Enterpris

Varun Beverages

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Varun Beverages Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Varun Beverages is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Cambridge Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cambridge Technology Enterprises are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Cambridge Technology is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Varun Beverages and Cambridge Technology

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

The idea behind Varun Beverages Limited and Cambridge Technology Enterprises 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 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.