Correlation Between Next Mediaworks and Patanjali Foods

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

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

Diversification Opportunities for Next Mediaworks and Patanjali Foods

0.38

Correlation Coefficient

Next Mediaworks  Patanjali Foods

Weak diversification

The 3 months correlation between Next and Patanjali is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Next Mediaworks 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 Next Mediaworks 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 Next Mediaworks 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 Next Mediaworks i.e., Next Mediaworks and Patanjali Foods go up and down completely randomly.

Pair Corralation between Next Mediaworks and Patanjali Foods

Assuming the 90 days trading horizon Next Mediaworks Limited is expected to generate 2.5 times more return on investment than Patanjali Foods. However, Next Mediaworks is 2.5 times more volatile than Patanjali Foods Limited. It trades about 0.06 of its potential returns per unit of risk. Patanjali Foods Limited is currently generating about 0.07 per unit of risk. If you would invest  748.00  in Next Mediaworks Limited on October 2, 2024 and sell it today you would earn a total of  84.00  from holding Next Mediaworks Limited or generate 11.23% return on investment over 90 days.

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

Next Mediaworks Limited  vs.  Patanjali Foods Limited

Next Mediaworks

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Next Mediaworks Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Next Mediaworks exhibited solid returns over the last few months and may actually be approaching a breakup point.

Patanjali Foods

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Patanjali Foods Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Patanjali Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Next Mediaworks and Patanjali Foods

The main advantage of trading using opposite Next Mediaworks and Patanjali Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Next Mediaworks 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 Next Mediaworks 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.