Correlation Between Blue Coast and Parag Milk

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

By analyzing existing cross correlation between Blue Coast Hotels and Parag Milk Foods, you can compare the effects of market volatilities on Blue Coast and Parag Milk 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 Blue Coast with a short position of Parag Milk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Coast and Parag Milk.

Diversification Opportunities for Blue Coast and Parag Milk

-0.86

Correlation Coefficient

Blue Coast  Parag Milk

Pay attention - limited upside

The 3 months correlation between Blue and Parag is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Blue Coast Hotels and Parag Milk Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parag Milk Foods and Blue Coast 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 Blue Coast Hotels are associated (or correlated) with Parag Milk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parag Milk Foods has no effect on the direction of Blue Coast i.e., Blue Coast and Parag Milk go up and down completely randomly.

Pair Corralation between Blue Coast and Parag Milk

Assuming the 90 days trading horizon Blue Coast Hotels is expected to generate 1.39 times more return on investment than Parag Milk. However, Blue Coast is 1.39 times more volatile than Parag Milk Foods. It trades about 0.44 of its potential returns per unit of risk. Parag Milk Foods is currently generating about -0.09 per unit of risk. If you would invest  1,051  in Blue Coast Hotels on October 23, 2024 and sell it today you would earn a total of  1,437  from holding Blue Coast Hotels or generate 136.73% return on investment over 90 days.

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

Blue Coast Hotels  vs.  Parag Milk Foods

Blue Coast Hotels

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Coast Hotels are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Blue Coast sustained solid returns over the last few months and may actually be approaching a breakup point.

Parag Milk Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Parag Milk Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Blue Coast and Parag Milk

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

The idea behind Blue Coast Hotels and Parag Milk Foods 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.