Correlation Between Varun Beverages and Chambal Fertilizers

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

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

Diversification Opportunities for Varun Beverages and Chambal Fertilizers

-0.57

Correlation Coefficient

Varun Beverages  Chambal Fertilizers

Excellent diversification

The 3 months correlation between Varun and Chambal is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and Chambal Fertilizers Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chambal Fertilizers and Varun Beverages 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 Varun Beverages Limited are associated (or correlated) with Chambal Fertilizers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chambal Fertilizers has no effect on the direction of Varun Beverages i.e., Varun Beverages and Chambal Fertilizers go up and down completely randomly.

Pair Corralation between Varun Beverages and Chambal Fertilizers

Assuming the 90 days trading horizon Varun Beverages Limited is expected to under-perform the Chambal Fertilizers. But the stock apears to be less risky and, when comparing its historical volatility, Varun Beverages Limited is 1.04 times less risky than Chambal Fertilizers. The stock trades about -0.09 of its potential returns per unit of risk. The Chambal Fertilizers Chemicals is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  50,055  in Chambal Fertilizers Chemicals on December 25, 2024 and sell it today you would earn a total of  11,895  from holding Chambal Fertilizers Chemicals or generate 23.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Varun Beverages Limited  vs.  Chambal Fertilizers Chemicals

Varun Beverages

Risk-Adjusted Performance

Very Weak

Over the last 90 days Varun Beverages Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Chambal Fertilizers

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chambal Fertilizers Chemicals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Chambal Fertilizers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Varun Beverages and Chambal Fertilizers

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

The idea behind Varun Beverages Limited and Chambal Fertilizers Chemicals 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.