Correlation Between Bikaji Foods and Thermax

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

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

Diversification Opportunities for Bikaji Foods and Thermax

0.68

Correlation Coefficient

Bikaji Foods  Thermax

Poor diversification

The 3 months correlation between Bikaji and Thermax is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bikaji Foods International and Thermax Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermax Limited and Bikaji Foods 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 Bikaji Foods International are associated (or correlated) with Thermax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermax Limited has no effect on the direction of Bikaji Foods i.e., Bikaji Foods and Thermax go up and down completely randomly.

Pair Corralation between Bikaji Foods and Thermax

Assuming the 90 days trading horizon Bikaji Foods International is expected to under-perform the Thermax. In addition to that, Bikaji Foods is 1.08 times more volatile than Thermax Limited. It trades about -0.07 of its total potential returns per unit of risk. Thermax Limited is currently generating about -0.03 per unit of volatility. If you would invest  520,700  in Thermax Limited on September 18, 2024 and sell it today you would lose (30,215) from holding Thermax Limited or give up 5.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Bikaji Foods International  vs.  Thermax Limited

Bikaji Foods Interna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bikaji Foods International 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.

Thermax Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thermax Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Thermax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bikaji Foods and Thermax

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

The idea behind Bikaji Foods International and Thermax 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.