Correlation Between Foods Inns and Britannia Industries

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

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

Diversification Opportunities for Foods Inns and Britannia Industries

-0.1

Correlation Coefficient

Foods Inns  Britannia Industries

Good diversification

The 3 months correlation between Foods and Britannia is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Foods Inns Limited and Britannia Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Britannia Industries and Foods Inns 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 Foods Inns Limited are associated (or correlated) with Britannia Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Britannia Industries has no effect on the direction of Foods Inns i.e., Foods Inns and Britannia Industries go up and down completely randomly.

Pair Corralation between Foods Inns and Britannia Industries

Assuming the 90 days trading horizon Foods Inns Limited is expected to under-perform the Britannia Industries. In addition to that, Foods Inns is 3.23 times more volatile than Britannia Industries Limited. It trades about -0.12 of its total potential returns per unit of risk. Britannia Industries Limited is currently generating about -0.09 per unit of volatility. If you would invest  490,725  in Britannia Industries Limited on December 1, 2024 and sell it today you would lose (31,180) from holding Britannia Industries Limited or give up 6.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Foods Inns Limited  vs.  Britannia Industries Limited

Foods Inns Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Foods Inns 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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Britannia Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Britannia Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Britannia Industries is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Foods Inns and Britannia Industries

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

The idea behind Foods Inns Limited and Britannia Industries 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.