Correlation Between Investment Trust and Parag Milk

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

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

Diversification Opportunities for Investment Trust and Parag Milk

0.38

Correlation Coefficient

Investment Trust  Parag Milk

Weak diversification

The 3 months correlation between Investment and Parag is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding The Investment Trust 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 Investment Trust 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 Investment Trust 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 Investment Trust i.e., Investment Trust and Parag Milk go up and down completely randomly.

Pair Corralation between Investment Trust and Parag Milk

Assuming the 90 days trading horizon Investment Trust is expected to generate 2.85 times less return on investment than Parag Milk. But when comparing it to its historical volatility, The Investment Trust is 1.1 times less risky than Parag Milk. It trades about 0.03 of its potential returns per unit of risk. Parag Milk Foods is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  17,790  in Parag Milk Foods on September 21, 2024 and sell it today you would earn a total of  2,055  from holding Parag Milk Foods or generate 11.55% return on investment over 90 days.

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

The Investment Trust  vs.  Parag Milk Foods

Investment Trust

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Investment Trust 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, Investment Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Parag Milk Foods

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Parag Milk Foods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, Parag Milk demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Investment Trust and Parag Milk

The main advantage of trading using opposite Investment Trust and Parag Milk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment Trust 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 The Investment Trust 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.