Correlation Between Orient Technologies and Varun Beverages

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

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

Diversification Opportunities for Orient Technologies and Varun Beverages

0.67

Correlation Coefficient

Orient Technologies  Varun Beverages

Poor diversification

The 3 months correlation between Orient and Varun is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Orient Technologies Limited and Varun Beverages Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varun Beverages and Orient Technologies 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 Orient Technologies Limited 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 Orient Technologies i.e., Orient Technologies and Varun Beverages go up and down completely randomly.

Pair Corralation between Orient Technologies and Varun Beverages

Assuming the 90 days trading horizon Orient Technologies Limited is expected to generate 2.48 times more return on investment than Varun Beverages. However, Orient Technologies is 2.48 times more volatile than Varun Beverages Limited. It trades about 0.22 of its potential returns per unit of risk. Varun Beverages Limited is currently generating about 0.15 per unit of risk. If you would invest  36,308  in Orient Technologies Limited on October 6, 2024 and sell it today you would earn a total of  16,242  from holding Orient Technologies Limited or generate 44.73% return on investment over 90 days.

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

Orient Technologies Limited  vs.  Varun Beverages Limited

Orient Technologies

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Technologies Limited are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Orient Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Varun Beverages

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Varun Beverages Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Varun Beverages exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orient Technologies and Varun Beverages

The main advantage of trading using opposite Orient Technologies and Varun Beverages positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orient Technologies 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 Orient Technologies Limited 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.