Correlation Between Varun Beverages and GPT Healthcare

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

Diversification Opportunities for Varun Beverages and GPT Healthcare

0.48

Correlation Coefficient

Varun Beverages  GPT Healthcare

Very weak diversification

The 3 months correlation between Varun and GPT is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and GPT Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GPT Healthcare 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 GPT Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GPT Healthcare has no effect on the direction of Varun Beverages i.e., Varun Beverages and GPT Healthcare go up and down completely randomly.

Pair Corralation between Varun Beverages and GPT Healthcare

Assuming the 90 days trading horizon Varun Beverages Limited is expected to under-perform the GPT Healthcare. In addition to that, Varun Beverages is 1.31 times more volatile than GPT Healthcare. It trades about -0.03 of its total potential returns per unit of risk. GPT Healthcare is currently generating about -0.01 per unit of volatility. If you would invest  18,271  in GPT Healthcare on September 22, 2024 and sell it today you would lose (469.00) from holding GPT Healthcare or give up 2.57% of portfolio value over 90 days.

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

Varun Beverages Limited  vs.  GPT Healthcare

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

GPT Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GPT Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, GPT Healthcare is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Varun Beverages and GPT Healthcare

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

The idea behind Varun Beverages Limited and GPT Healthcare 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..