Correlation Between Varun Beverages and SIL Investments

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

Diversification Opportunities for Varun Beverages and SIL Investments

-0.23

Correlation Coefficient

Varun Beverages  SIL Investments

Very good diversification

The 3 months correlation between Varun and SIL is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and SIL Investments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIL Investments 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 SIL Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIL Investments has no effect on the direction of Varun Beverages i.e., Varun Beverages and SIL Investments go up and down completely randomly.

Pair Corralation between Varun Beverages and SIL Investments

Assuming the 90 days trading horizon Varun Beverages is expected to generate 4.13 times less return on investment than SIL Investments. But when comparing it to its historical volatility, Varun Beverages Limited is 1.52 times less risky than SIL Investments. It trades about 0.04 of its potential returns per unit of risk. SIL Investments Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  43,385  in SIL Investments Limited on September 2, 2024 and sell it today you would earn a total of  25,080  from holding SIL Investments Limited or generate 57.81% 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.  SIL Investments Limited

Varun Beverages

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Varun Beverages Limited 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, Varun Beverages is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

SIL Investments

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SIL Investments Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady forward indicators, SIL Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Varun Beverages and SIL Investments

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

The idea behind Varun Beverages Limited and SIL Investments 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.