Correlation Between Hindustan Foods and Patanjali Foods

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

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

Diversification Opportunities for Hindustan Foods and Patanjali Foods

-0.58

Correlation Coefficient

Hindustan Foods  Patanjali Foods

Excellent diversification

The 3 months correlation between Hindustan and Patanjali is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Hindustan Foods Limited and Patanjali Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patanjali Foods and Hindustan Foods 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 Hindustan Foods Limited 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 Hindustan Foods i.e., Hindustan Foods and Patanjali Foods go up and down completely randomly.

Pair Corralation between Hindustan Foods and Patanjali Foods

Assuming the 90 days trading horizon Hindustan Foods Limited is expected to under-perform the Patanjali Foods. In addition to that, Hindustan Foods is 1.08 times more volatile than Patanjali Foods Limited. It trades about -0.08 of its total potential returns per unit of risk. Patanjali Foods Limited is currently generating about 0.03 per unit of volatility. If you would invest  178,806  in Patanjali Foods Limited on September 18, 2024 and sell it today you would earn a total of  4,679  from holding Patanjali Foods Limited or generate 2.62% return on investment over 90 days.

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

Hindustan Foods Limited  vs.  Patanjali Foods Limited

Hindustan Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindustan Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Patanjali Foods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Patanjali Foods Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Patanjali Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hindustan Foods and Patanjali Foods

The main advantage of trading using opposite Hindustan Foods and Patanjali Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hindustan Foods 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 Hindustan Foods Limited 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.