Correlation Between Parag Milk and Sandhar Technologies

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

Diversification Opportunities for Parag Milk and Sandhar Technologies

0.1

Correlation Coefficient

Parag Milk  Sandhar Technologies

Average diversification

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

Pair Corralation between Parag Milk and Sandhar Technologies

Assuming the 90 days trading horizon Parag Milk Foods is expected to under-perform the Sandhar Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Parag Milk Foods is 1.47 times less risky than Sandhar Technologies. The stock trades about -0.34 of its potential returns per unit of risk. The Sandhar Technologies Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  51,810  in Sandhar Technologies Limited on September 27, 2024 and sell it today you would earn a total of  525.00  from holding Sandhar Technologies Limited or generate 1.01% return on investment over 90 days.

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

Parag Milk Foods  vs.  Sandhar Technologies 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.

Sandhar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sandhar Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sandhar Technologies is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Parag Milk and Sandhar Technologies

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

The idea behind Parag Milk Foods and Sandhar Technologies 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.