Correlation Between Parag Milk and Hi Tech

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

Diversification Opportunities for Parag Milk and Hi Tech

-0.1

Correlation Coefficient

Parag Milk  Hi Tech

Good diversification

The 3 months correlation between Parag and HITECH is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Parag Milk Foods and Hi Tech Pipes Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Tech Pipes 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 Hi Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Tech Pipes has no effect on the direction of Parag Milk i.e., Parag Milk and Hi Tech go up and down completely randomly.

Pair Corralation between Parag Milk and Hi Tech

Assuming the 90 days trading horizon Parag Milk Foods is expected to generate 1.35 times more return on investment than Hi Tech. However, Parag Milk is 1.35 times more volatile than Hi Tech Pipes Limited. It trades about 0.06 of its potential returns per unit of risk. Hi Tech Pipes Limited is currently generating about -0.18 per unit of risk. If you would invest  17,790  in Parag Milk Foods on September 23, 2024 and sell it today you would earn a total of  1,692  from holding Parag Milk Foods or generate 9.51% 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.  Hi Tech Pipes Limited

Parag Milk Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Parag Milk Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, Parag Milk may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hi Tech Pipes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hi Tech Pipes Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Parag Milk and Hi Tech

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

The idea behind Parag Milk Foods and Hi Tech Pipes 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.