Correlation Between Varun Beverages and Max Financial

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

Diversification Opportunities for Varun Beverages and Max Financial

-0.18

Correlation Coefficient

Varun Beverages  Max Financial

Good diversification

The 3 months correlation between Varun and Max is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and Max Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Max Financial Services 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 Max Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Max Financial Services has no effect on the direction of Varun Beverages i.e., Varun Beverages and Max Financial go up and down completely randomly.

Pair Corralation between Varun Beverages and Max Financial

Assuming the 90 days trading horizon Varun Beverages Limited is expected to generate 1.39 times more return on investment than Max Financial. However, Varun Beverages is 1.39 times more volatile than Max Financial Services. It trades about 0.04 of its potential returns per unit of risk. Max Financial Services is currently generating about -0.01 per unit of risk. If you would invest  60,900  in Varun Beverages Limited on September 4, 2024 and sell it today you would earn a total of  2,325  from holding Varun Beverages Limited or generate 3.82% return on investment over 90 days.

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

Varun Beverages Limited  vs.  Max Financial Services

Varun Beverages

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Varun Beverages Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Varun Beverages is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Max Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Max Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Max Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Varun Beverages and Max Financial

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

The idea behind Varun Beverages Limited and Max Financial Services 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.