Correlation Between Jindal Poly and Varun Beverages

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

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

Diversification Opportunities for Jindal Poly and Varun Beverages

0.45

Correlation Coefficient

Jindal Poly  Varun Beverages

Very weak diversification

The 3 months correlation between Jindal and Varun is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Jindal Poly Investment and Varun Beverages Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varun Beverages and Jindal Poly 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 Jindal Poly Investment 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 Jindal Poly i.e., Jindal Poly and Varun Beverages go up and down completely randomly.

Pair Corralation between Jindal Poly and Varun Beverages

Assuming the 90 days trading horizon Jindal Poly Investment is expected to generate 1.43 times more return on investment than Varun Beverages. However, Jindal Poly is 1.43 times more volatile than Varun Beverages Limited. It trades about 0.07 of its potential returns per unit of risk. Varun Beverages Limited is currently generating about 0.01 per unit of risk. If you would invest  83,125  in Jindal Poly Investment on September 13, 2024 and sell it today you would earn a total of  10,425  from holding Jindal Poly Investment or generate 12.54% return on investment over 90 days.

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

Jindal Poly Investment  vs.  Varun Beverages Limited

Jindal Poly Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jindal Poly Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Jindal Poly displayed solid returns over the last few months and may actually be approaching a breakup point.

Varun Beverages

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Varun Beverages Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Varun Beverages is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Jindal Poly and Varun Beverages

The main advantage of trading using opposite Jindal Poly and Varun Beverages positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jindal Poly 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 Jindal Poly Investment 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.