Correlation Between Parag Milk and DCB Bank

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

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

Diversification Opportunities for Parag Milk and DCB Bank

-0.02

Correlation Coefficient

Parag Milk  DCB Bank

Good diversification

The 3 months correlation between Parag and DCB is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Parag Milk Foods and DCB Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DCB Bank Limited and Parag Milk 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 Parag Milk Foods are associated (or correlated) with DCB Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DCB Bank Limited has no effect on the direction of Parag Milk i.e., Parag Milk and DCB Bank go up and down completely randomly.

Pair Corralation between Parag Milk and DCB Bank

Assuming the 90 days trading horizon Parag Milk Foods is expected to under-perform the DCB Bank. In addition to that, Parag Milk is 1.61 times more volatile than DCB Bank Limited. It trades about -0.01 of its total potential returns per unit of risk. DCB Bank Limited is currently generating about 0.06 per unit of volatility. If you would invest  11,496  in DCB Bank Limited on October 7, 2024 and sell it today you would earn a total of  614.00  from holding DCB Bank Limited or generate 5.34% return on investment over 90 days.

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

Parag Milk Foods  vs.  DCB Bank Limited

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 latest stock price confusion, may contribute to short-horizon losses for the traders.

DCB Bank Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DCB Bank Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, DCB Bank is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Parag Milk and DCB Bank

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

The idea behind Parag Milk Foods and DCB Bank 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.