Correlation Between India Glycols and Parag Milk

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

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

Diversification Opportunities for India Glycols and Parag Milk

0.5

Correlation Coefficient

India Glycols  Parag Milk

Very weak diversification

The 3 months correlation between India and Parag is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding India Glycols Limited and Parag Milk Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parag Milk Foods and India Glycols 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 India Glycols Limited are associated (or correlated) with Parag Milk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parag Milk Foods has no effect on the direction of India Glycols i.e., India Glycols and Parag Milk go up and down completely randomly.

Pair Corralation between India Glycols and Parag Milk

Assuming the 90 days trading horizon India Glycols Limited is expected to generate 0.95 times more return on investment than Parag Milk. However, India Glycols Limited is 1.06 times less risky than Parag Milk. It trades about 0.07 of its potential returns per unit of risk. Parag Milk Foods is currently generating about 0.01 per unit of risk. If you would invest  74,933  in India Glycols Limited on September 28, 2024 and sell it today you would earn a total of  52,372  from holding India Glycols Limited or generate 69.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.38%
Values	Daily Returns

India Glycols Limited  vs.  Parag Milk Foods

India Glycols Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in India Glycols Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, India Glycols may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Parag Milk Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Parag Milk Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Parag Milk is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with India Glycols and Parag Milk

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

The idea behind India Glycols Limited and Parag Milk Foods 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.