Correlation Between Cartrade Tech and Parag Milk

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

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

Diversification Opportunities for Cartrade Tech and Parag Milk

-0.13

Correlation Coefficient

Cartrade Tech  Parag Milk

Good diversification

The 3 months correlation between Cartrade and Parag is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Cartrade Tech Limited 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 Cartrade Tech 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 Cartrade Tech Limited 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 Cartrade Tech i.e., Cartrade Tech and Parag Milk go up and down completely randomly.

Pair Corralation between Cartrade Tech and Parag Milk

Assuming the 90 days trading horizon Cartrade Tech Limited is expected to generate 1.69 times more return on investment than Parag Milk. However, Cartrade Tech is 1.69 times more volatile than Parag Milk Foods. It trades about -0.04 of its potential returns per unit of risk. Parag Milk Foods is currently generating about -0.29 per unit of risk. If you would invest  153,785  in Cartrade Tech Limited on October 20, 2024 and sell it today you would lose (6,560) from holding Cartrade Tech Limited or give up 4.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Cartrade Tech Limited  vs.  Parag Milk Foods

Cartrade Tech Limited

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cartrade Tech Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Cartrade Tech exhibited 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 unsteady 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 Cartrade Tech and Parag Milk

The main advantage of trading using opposite Cartrade Tech and Parag Milk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cartrade Tech 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 Cartrade Tech Limited 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.