Correlation Between Garware Hi and Patanjali Foods

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

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

Diversification Opportunities for Garware Hi and Patanjali Foods

0.23

Correlation Coefficient

Garware Hi  Patanjali Foods

Modest diversification

The 3 months correlation between Garware and Patanjali is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Garware Hi Tech Films and Patanjali Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patanjali Foods and Garware Hi 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 Garware Hi Tech Films 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 Garware Hi i.e., Garware Hi and Patanjali Foods go up and down completely randomly.

Pair Corralation between Garware Hi and Patanjali Foods

Assuming the 90 days trading horizon Garware Hi Tech Films is expected to under-perform the Patanjali Foods. In addition to that, Garware Hi is 2.56 times more volatile than Patanjali Foods Limited. It trades about -0.25 of its total potential returns per unit of risk. Patanjali Foods Limited is currently generating about 0.24 per unit of volatility. If you would invest  174,430  in Patanjali Foods Limited on October 22, 2024 and sell it today you would earn a total of  11,150  from holding Patanjali Foods Limited or generate 6.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Garware Hi Tech Films  vs.  Patanjali Foods Limited

Garware Hi Tech

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Garware Hi Tech Films are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Garware Hi unveiled solid returns over the last few months and may actually be approaching a breakup point.

Patanjali Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Patanjali Foods Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Patanjali Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Garware Hi and Patanjali Foods

The main advantage of trading using opposite Garware Hi and Patanjali Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garware Hi 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 Garware Hi Tech Films 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.