Correlation Between Linc and Parag Milk

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

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

Diversification Opportunities for Linc and Parag Milk

-0.52

Correlation Coefficient

Linc  Parag Milk

Excellent diversification

The 3 months correlation between Linc and Parag is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Linc 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 Linc 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 Linc 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 Linc i.e., Linc and Parag Milk go up and down completely randomly.

Pair Corralation between Linc and Parag Milk

Assuming the 90 days trading horizon Linc Limited is expected to generate 0.93 times more return on investment than Parag Milk. However, Linc Limited is 1.08 times less risky than Parag Milk. It trades about 0.04 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  65,554  in Linc Limited on September 20, 2024 and sell it today you would earn a total of  10,981  from holding Linc Limited or generate 16.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.18%
Values	Daily Returns

Linc Limited  vs.  Parag Milk Foods

Linc Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Linc Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Linc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Parag Milk Foods

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Parag Milk Foods are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, Parag Milk demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Linc and Parag Milk

The main advantage of trading using opposite Linc and Parag Milk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linc 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 Linc 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 CEOs Directory module to screen CEOs from public companies around the world.