Correlation Between TATA SUMER and Parag Milk

Can any of the company-specific risk be diversified away by investing in both TATA SUMER and Parag Milk 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 TATA SUMER and Parag Milk into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TATA SUMER PRODUCTS and Parag Milk Foods, you can compare the effects of market volatilities on TATA SUMER and Parag Milk 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 TATA SUMER with a short position of Parag Milk. Check out your portfolio center. Please also check ongoing floating volatility patterns of TATA SUMER and Parag Milk.

Diversification Opportunities for TATA SUMER and Parag Milk

0.43

Correlation Coefficient

TATA SUMER  Parag Milk

Very weak diversification

The 3 months correlation between TATA and Parag is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding TATA SUMER PRODUCTS and Parag Milk Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parag Milk Foods and TATA SUMER 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 TATA SUMER PRODUCTS are associated (or correlated) with Parag Milk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parag Milk Foods has no effect on the direction of TATA SUMER i.e., TATA SUMER and Parag Milk go up and down completely randomly.

Pair Corralation between TATA SUMER and Parag Milk

Assuming the 90 days trading horizon TATA SUMER PRODUCTS is expected to generate 0.45 times more return on investment than Parag Milk. However, TATA SUMER PRODUCTS is 2.25 times less risky than Parag Milk. It trades about 0.23 of its potential returns per unit of risk. Parag Milk Foods is currently generating about -0.29 per unit of risk. If you would invest  90,710  in TATA SUMER PRODUCTS on October 20, 2024 and sell it today you would earn a total of  4,735  from holding TATA SUMER PRODUCTS or generate 5.22% return on investment over 90 days.

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

TATA SUMER PRODUCTS  vs.  Parag Milk Foods

TATA SUMER PRODUCTS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TATA SUMER PRODUCTS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, TATA SUMER is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Parag Milk Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Parag Milk Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady 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 TATA SUMER and Parag Milk

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

The idea behind TATA SUMER PRODUCTS and Parag Milk Foods 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.