Correlation Between Patanjali Foods and Thermax

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

Diversification Opportunities for Patanjali Foods and Thermax

-0.46

Correlation Coefficient

Patanjali Foods  Thermax

Very good diversification

The 3 months correlation between Patanjali and Thermax is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Patanjali Foods Limited and Thermax Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermax Limited 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 Thermax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermax Limited has no effect on the direction of Patanjali Foods i.e., Patanjali Foods and Thermax go up and down completely randomly.

Pair Corralation between Patanjali Foods and Thermax

Assuming the 90 days trading horizon Patanjali Foods Limited is expected to generate 0.88 times more return on investment than Thermax. However, Patanjali Foods Limited is 1.14 times less risky than Thermax. It trades about 0.03 of its potential returns per unit of risk. Thermax Limited is currently generating about -0.03 per unit of risk. If you would invest  178,806  in Patanjali Foods Limited on September 18, 2024 and sell it today you would earn a total of  4,679  from holding Patanjali Foods Limited or generate 2.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Patanjali Foods Limited  vs.  Thermax Limited

Patanjali Foods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Patanjali Foods Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Patanjali Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Thermax Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thermax Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Thermax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Patanjali Foods and Thermax

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

The idea behind Patanjali Foods Limited and Thermax 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.