Correlation Between Chemcon Speciality and Patanjali Foods

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

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

Diversification Opportunities for Chemcon Speciality and Patanjali Foods

-0.37

Correlation Coefficient

Chemcon Speciality  Patanjali Foods

Very good diversification

The 3 months correlation between Chemcon and Patanjali is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Chemcon Speciality Chemicals and Patanjali Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patanjali Foods and Chemcon Speciality 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 Chemcon Speciality Chemicals 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 Chemcon Speciality i.e., Chemcon Speciality and Patanjali Foods go up and down completely randomly.

Pair Corralation between Chemcon Speciality and Patanjali Foods

Assuming the 90 days trading horizon Chemcon Speciality Chemicals is expected to under-perform the Patanjali Foods. But the stock apears to be less risky and, when comparing its historical volatility, Chemcon Speciality Chemicals is 1.24 times less risky than Patanjali Foods. The stock trades about -0.05 of its potential returns per unit of risk. The Patanjali Foods Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  161,952  in Patanjali Foods Limited on October 9, 2024 and sell it today you would earn a total of  24,603  from holding Patanjali Foods Limited or generate 15.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.18%
Values	Daily Returns

Chemcon Speciality Chemicals  vs.  Patanjali Foods Limited

Chemcon Speciality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemcon Speciality Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Patanjali Foods

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Patanjali Foods Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Patanjali Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Chemcon Speciality and Patanjali Foods

The main advantage of trading using opposite Chemcon Speciality and Patanjali Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chemcon Speciality 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 Chemcon Speciality Chemicals 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.