Correlation Between Vinati Organics and Patanjali Foods

Can any of the company-specific risk be diversified away by investing in both Vinati Organics and Patanjali 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 Vinati Organics and Patanjali Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vinati Organics Limited and Patanjali Foods Limited, you can compare the effects of market volatilities on Vinati Organics and Patanjali 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 Vinati Organics with a short position of Patanjali Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vinati Organics and Patanjali Foods.

Diversification Opportunities for Vinati Organics and Patanjali Foods

-0.44

Correlation Coefficient

Vinati Organics  Patanjali Foods

Very good diversification

The 3 months correlation between Vinati and Patanjali is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Vinati Organics Limited and Patanjali Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patanjali Foods and Vinati Organics 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 Vinati Organics Limited are associated (or correlated) with Patanjali Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patanjali Foods has no effect on the direction of Vinati Organics i.e., Vinati Organics and Patanjali Foods go up and down completely randomly.

Pair Corralation between Vinati Organics and Patanjali Foods

Assuming the 90 days trading horizon Vinati Organics Limited is expected to generate 0.84 times more return on investment than Patanjali Foods. However, Vinati Organics Limited is 1.19 times less risky than Patanjali Foods. It trades about -0.03 of its potential returns per unit of risk. Patanjali Foods Limited is currently generating about -0.05 per unit of risk. If you would invest  194,840  in Vinati Organics Limited on September 2, 2024 and sell it today you would lose (8,295) from holding Vinati Organics Limited or give up 4.26% of portfolio value over 90 days.

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

Vinati Organics Limited  vs.  Patanjali Foods Limited

Vinati Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vinati Organics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vinati Organics is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Patanjali Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Patanjali Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Vinati Organics and Patanjali Foods

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

The idea behind Vinati Organics Limited and Patanjali 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.