Correlation Between Patanjali Foods and Indian Overseas

Can any of the company-specific risk be diversified away by investing in both Patanjali Foods and Indian Overseas 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 Patanjali Foods and Indian Overseas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Patanjali Foods Limited and Indian Overseas Bank, you can compare the effects of market volatilities on Patanjali Foods and Indian Overseas 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 Patanjali Foods with a short position of Indian Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patanjali Foods and Indian Overseas.

Diversification Opportunities for Patanjali Foods and Indian Overseas

0.05

Correlation Coefficient

Patanjali Foods  Indian Overseas

Significant diversification

The 3 months correlation between Patanjali and Indian is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Patanjali Foods Limited and Indian Overseas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Overseas Bank and Patanjali Foods 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 Patanjali Foods Limited are associated (or correlated) with Indian Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Overseas Bank has no effect on the direction of Patanjali Foods i.e., Patanjali Foods and Indian Overseas go up and down completely randomly.

Pair Corralation between Patanjali Foods and Indian Overseas

Assuming the 90 days trading horizon Patanjali Foods Limited is expected to generate 0.94 times more return on investment than Indian Overseas. However, Patanjali Foods Limited is 1.07 times less risky than Indian Overseas. It trades about 0.03 of its potential returns per unit of risk. Indian Overseas Bank is currently generating about -0.27 per unit of risk. If you would invest  185,545  in Patanjali Foods Limited on October 8, 2024 and sell it today you would earn a total of  940.00  from holding Patanjali Foods Limited or generate 0.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Patanjali Foods Limited  vs.  Indian Overseas Bank

Patanjali Foods

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Patanjali Foods Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Patanjali Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Indian Overseas Bank

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Indian Overseas Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Indian Overseas is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Patanjali Foods and Indian Overseas

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

The idea behind Patanjali Foods Limited and Indian Overseas Bank 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.