Correlation Between 20 Microns and Patanjali Foods

Can any of the company-specific risk be diversified away by investing in both 20 Microns 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 20 Microns and Patanjali Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 20 Microns Limited and Patanjali Foods Limited, you can compare the effects of market volatilities on 20 Microns 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 20 Microns with a short position of Patanjali Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of 20 Microns and Patanjali Foods.

Diversification Opportunities for 20 Microns and Patanjali Foods

-0.37

Correlation Coefficient

20 Microns  Patanjali Foods

Very good diversification

The 3 months correlation between 20MICRONS and Patanjali is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding 20 Microns 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 20 Microns 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 20 Microns 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 20 Microns i.e., 20 Microns and Patanjali Foods go up and down completely randomly.

Pair Corralation between 20 Microns and Patanjali Foods

Assuming the 90 days trading horizon 20 Microns Limited is expected to under-perform the Patanjali Foods. In addition to that, 20 Microns is 1.31 times more volatile than Patanjali Foods Limited. It trades about -0.08 of its total potential returns per unit of risk. Patanjali Foods Limited is currently generating about 0.0 per unit of volatility. If you would invest  184,287  in Patanjali Foods Limited on September 17, 2024 and sell it today you would lose (2,407) from holding Patanjali Foods Limited or give up 1.31% of portfolio value over 90 days.

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

20 Microns Limited  vs.  Patanjali Foods Limited

20 Microns Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 20 Microns Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 somewhat strong basic indicators, Patanjali Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with 20 Microns and Patanjali Foods

The main advantage of trading using opposite 20 Microns and Patanjali Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 20 Microns 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 20 Microns 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.