Correlation Between Parag Milk and Jubilant Foodworks

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

Diversification Opportunities for Parag Milk and Jubilant Foodworks

0.18

Correlation Coefficient

Parag Milk  Jubilant Foodworks

Average diversification

The 3 months correlation between Parag and Jubilant is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Parag Milk Foods and Jubilant Foodworks Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jubilant Foodworks 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 Jubilant Foodworks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jubilant Foodworks has no effect on the direction of Parag Milk i.e., Parag Milk and Jubilant Foodworks go up and down completely randomly.

Pair Corralation between Parag Milk and Jubilant Foodworks

Assuming the 90 days trading horizon Parag Milk Foods is expected to under-perform the Jubilant Foodworks. In addition to that, Parag Milk is 1.02 times more volatile than Jubilant Foodworks Limited. It trades about -0.22 of its total potential returns per unit of risk. Jubilant Foodworks Limited is currently generating about -0.04 per unit of volatility. If you would invest  66,205  in Jubilant Foodworks Limited on December 5, 2024 and sell it today you would lose (5,180) from holding Jubilant Foodworks Limited or give up 7.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Parag Milk Foods  vs.  Jubilant Foodworks Limited

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.

Jubilant Foodworks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jubilant Foodworks Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Parag Milk and Jubilant Foodworks

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

The idea behind Parag Milk Foods and Jubilant Foodworks 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.