Correlation Between State Trading and Varun Beverages

Can any of the company-specific risk be diversified away by investing in both State Trading and Varun Beverages 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 State Trading and Varun Beverages into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The State Trading and Varun Beverages Limited, you can compare the effects of market volatilities on State Trading and Varun Beverages 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 State Trading with a short position of Varun Beverages. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Trading and Varun Beverages.

Diversification Opportunities for State Trading and Varun Beverages

0.55

Correlation Coefficient

State Trading  Varun Beverages

Very weak diversification

The 3 months correlation between State and Varun is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding The State Trading and Varun Beverages Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varun Beverages and State Trading 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 The State Trading are associated (or correlated) with Varun Beverages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varun Beverages has no effect on the direction of State Trading i.e., State Trading and Varun Beverages go up and down completely randomly.

Pair Corralation between State Trading and Varun Beverages

Assuming the 90 days trading horizon The State Trading is expected to under-perform the Varun Beverages. In addition to that, State Trading is 1.48 times more volatile than Varun Beverages Limited. It trades about -0.02 of its total potential returns per unit of risk. Varun Beverages Limited is currently generating about 0.04 per unit of volatility. If you would invest  62,105  in Varun Beverages Limited on September 15, 2024 and sell it today you would earn a total of  2,460  from holding Varun Beverages Limited or generate 3.96% return on investment over 90 days.

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

The State Trading  vs.  Varun Beverages Limited

State Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The State Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, State Trading is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Varun Beverages

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Varun Beverages Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Varun Beverages is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with State Trading and Varun Beverages

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

The idea behind The State Trading and Varun Beverages 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.