Correlation Between Parag Milk and Garuda Construction

Can any of the company-specific risk be diversified away by investing in both Parag Milk and Garuda Construction 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 Garuda Construction 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 Garuda Construction Engineering, you can compare the effects of market volatilities on Parag Milk and Garuda Construction 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 Garuda Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parag Milk and Garuda Construction.

Diversification Opportunities for Parag Milk and Garuda Construction

0.68

Correlation Coefficient

Parag Milk  Garuda Construction

Poor diversification

The 3 months correlation between Parag and Garuda is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Parag Milk Foods and Garuda Construction Engineerin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garuda Construction 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 Garuda Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garuda Construction has no effect on the direction of Parag Milk i.e., Parag Milk and Garuda Construction go up and down completely randomly.

Pair Corralation between Parag Milk and Garuda Construction

Assuming the 90 days trading horizon Parag Milk Foods is expected to under-perform the Garuda Construction. But the stock apears to be less risky and, when comparing its historical volatility, Parag Milk Foods is 1.43 times less risky than Garuda Construction. The stock trades about -0.09 of its potential returns per unit of risk. The Garuda Construction Engineering is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  12,725  in Garuda Construction Engineering on December 27, 2024 and sell it today you would lose (2,294) from holding Garuda Construction Engineering or give up 18.03% of portfolio value over 90 days.

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

Parag Milk Foods  vs.  Garuda Construction Engineerin

Parag Milk Foods

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Garuda Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Garuda Construction Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Parag Milk and Garuda Construction

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

The idea behind Parag Milk Foods and Garuda Construction Engineering 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.