Correlation Between Gokul Refoils and Varun Beverages

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

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

Diversification Opportunities for Gokul Refoils and Varun Beverages

0.31

Correlation Coefficient

Gokul Refoils  Varun Beverages

Weak diversification

The 3 months correlation between Gokul and Varun is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Gokul Refoils and and Varun Beverages Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varun Beverages and Gokul Refoils 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 Gokul Refoils and are associated (or correlated) with Varun Beverages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varun Beverages has no effect on the direction of Gokul Refoils i.e., Gokul Refoils and Varun Beverages go up and down completely randomly.

Pair Corralation between Gokul Refoils and Varun Beverages

Assuming the 90 days trading horizon Gokul Refoils and is expected to generate 1.22 times more return on investment than Varun Beverages. However, Gokul Refoils is 1.22 times more volatile than Varun Beverages Limited. It trades about 0.36 of its potential returns per unit of risk. Varun Beverages Limited is currently generating about 0.07 per unit of risk. If you would invest  5,453  in Gokul Refoils and on September 28, 2024 and sell it today you would earn a total of  799.00  from holding Gokul Refoils and or generate 14.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Gokul Refoils and  vs.  Varun Beverages Limited

Gokul Refoils

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gokul Refoils and are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward-looking signals, Gokul Refoils displayed solid returns over the last few months and may actually be approaching a breakup point.

Varun Beverages

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Varun Beverages Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Varun Beverages is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gokul Refoils and Varun Beverages

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

The idea behind Gokul Refoils and and Varun Beverages 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.