Correlation Between Varun Beverages and Kohinoor Foods

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

Diversification Opportunities for Varun Beverages and Kohinoor Foods

0.03

Correlation Coefficient

Varun Beverages  Kohinoor Foods

Significant diversification

The 3 months correlation between Varun and Kohinoor is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and Kohinoor Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kohinoor Foods 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 Kohinoor Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kohinoor Foods has no effect on the direction of Varun Beverages i.e., Varun Beverages and Kohinoor Foods go up and down completely randomly.

Pair Corralation between Varun Beverages and Kohinoor Foods

Assuming the 90 days trading horizon Varun Beverages Limited is expected to generate 0.85 times more return on investment than Kohinoor Foods. However, Varun Beverages Limited is 1.18 times less risky than Kohinoor Foods. It trades about -0.03 of its potential returns per unit of risk. Kohinoor Foods Limited is currently generating about -0.04 per unit of risk. If you would invest  65,410  in Varun Beverages Limited on September 22, 2024 and sell it today you would lose (4,155) from holding Varun Beverages Limited or give up 6.35% of portfolio value over 90 days.

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

Varun Beverages Limited  vs.  Kohinoor Foods Limited

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.

Kohinoor Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kohinoor Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Varun Beverages and Kohinoor Foods

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

The idea behind Varun Beverages Limited and Kohinoor Foods 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.