Correlation Between Patanjali Foods and Premier Polyfilm

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

Diversification Opportunities for Patanjali Foods and Premier Polyfilm

0.11

Correlation Coefficient

Patanjali Foods  Premier Polyfilm

Average diversification

The 3 months correlation between Patanjali and Premier is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Patanjali Foods Limited and Premier Polyfilm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Polyfilm 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 Premier Polyfilm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Polyfilm has no effect on the direction of Patanjali Foods i.e., Patanjali Foods and Premier Polyfilm go up and down completely randomly.

Pair Corralation between Patanjali Foods and Premier Polyfilm

Assuming the 90 days trading horizon Patanjali Foods is expected to generate 21.37 times less return on investment than Premier Polyfilm. But when comparing it to its historical volatility, Patanjali Foods Limited is 2.02 times less risky than Premier Polyfilm. It trades about 0.03 of its potential returns per unit of risk. Premier Polyfilm Limited is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  5,990  in Premier Polyfilm Limited on October 6, 2024 and sell it today you would earn a total of  2,526  from holding Premier Polyfilm Limited or generate 42.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Patanjali Foods Limited  vs.  Premier Polyfilm Limited

Patanjali Foods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Patanjali Foods Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Patanjali Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Premier Polyfilm

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Polyfilm Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Premier Polyfilm reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Patanjali Foods and Premier Polyfilm

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

The idea behind Patanjali Foods Limited and Premier Polyfilm 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.