Correlation Between Ravi Kumar and Nestle India

Can any of the company-specific risk be diversified away by investing in both Ravi Kumar and Nestle India 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 Ravi Kumar and Nestle India into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ravi Kumar Distilleries and Nestle India Limited, you can compare the effects of market volatilities on Ravi Kumar and Nestle India 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 Ravi Kumar with a short position of Nestle India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ravi Kumar and Nestle India.

Diversification Opportunities for Ravi Kumar and Nestle India

-0.23

Correlation Coefficient

Ravi Kumar  Nestle India

Very good diversification

The 3 months correlation between Ravi and Nestle is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ravi Kumar Distilleries and Nestle India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle India Limited and Ravi Kumar 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 Ravi Kumar Distilleries are associated (or correlated) with Nestle India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestle India Limited has no effect on the direction of Ravi Kumar i.e., Ravi Kumar and Nestle India go up and down completely randomly.

Pair Corralation between Ravi Kumar and Nestle India

Assuming the 90 days trading horizon Ravi Kumar Distilleries is expected to under-perform the Nestle India. In addition to that, Ravi Kumar is 1.61 times more volatile than Nestle India Limited. It trades about -0.43 of its total potential returns per unit of risk. Nestle India Limited is currently generating about -0.1 per unit of volatility. If you would invest  222,900  in Nestle India Limited on October 9, 2024 and sell it today you would lose (4,400) from holding Nestle India Limited or give up 1.97% of portfolio value over 90 days.

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

Ravi Kumar Distilleries  vs.  Nestle India Limited

Ravi Kumar Distilleries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ravi Kumar Distilleries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Ravi Kumar may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Nestle India Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nestle India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Ravi Kumar and Nestle India

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

The idea behind Ravi Kumar Distilleries and Nestle India 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.