Correlation Between Parag Milk and India Glycols

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

Diversification Opportunities for Parag Milk and India Glycols

0.5

Correlation Coefficient

Parag Milk  India Glycols

Very weak diversification

The 3 months correlation between Parag and India is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Parag Milk Foods and India Glycols Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on India Glycols 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 India Glycols. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of India Glycols Limited has no effect on the direction of Parag Milk i.e., Parag Milk and India Glycols go up and down completely randomly.

Pair Corralation between Parag Milk and India Glycols

Assuming the 90 days trading horizon Parag Milk Foods is expected to generate 1.16 times more return on investment than India Glycols. However, Parag Milk is 1.16 times more volatile than India Glycols Limited. It trades about 0.06 of its potential returns per unit of risk. India Glycols Limited is currently generating about 0.06 per unit of risk. If you would invest  10,084  in Parag Milk Foods on September 28, 2024 and sell it today you would earn a total of  8,368  from holding Parag Milk Foods or generate 82.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.59%
Values	Daily Returns

Parag Milk Foods  vs.  India Glycols 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 newest stock price confusion, may contribute to short-horizon losses for the traders.

India Glycols Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in India Glycols Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, India Glycols may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Parag Milk and India Glycols

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

The idea behind Parag Milk Foods and India Glycols 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.