Correlation Between Varun Beverages and Cholamandalam Investment

Can any of the company-specific risk be diversified away by investing in both Varun Beverages and Cholamandalam Investment 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 Cholamandalam Investment 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 Cholamandalam Investment and, you can compare the effects of market volatilities on Varun Beverages and Cholamandalam Investment 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 Cholamandalam Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Varun Beverages and Cholamandalam Investment.

Diversification Opportunities for Varun Beverages and Cholamandalam Investment

-0.48

Correlation Coefficient

Varun Beverages  Cholamandalam Investment

Very good diversification

The 3 months correlation between Varun and Cholamandalam is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and Cholamandalam Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cholamandalam Investment 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 Cholamandalam Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cholamandalam Investment has no effect on the direction of Varun Beverages i.e., Varun Beverages and Cholamandalam Investment go up and down completely randomly.

Pair Corralation between Varun Beverages and Cholamandalam Investment

Assuming the 90 days trading horizon Varun Beverages Limited is expected to under-perform the Cholamandalam Investment. In addition to that, Varun Beverages is 1.01 times more volatile than Cholamandalam Investment and. It trades about -0.17 of its total potential returns per unit of risk. Cholamandalam Investment and is currently generating about 0.08 per unit of volatility. If you would invest  123,384  in Cholamandalam Investment and on November 29, 2024 and sell it today you would earn a total of  13,396  from holding Cholamandalam Investment and or generate 10.86% return on investment over 90 days.

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

Varun Beverages Limited  vs.  Cholamandalam Investment and

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Cholamandalam Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cholamandalam Investment and are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical and fundamental indicators, Cholamandalam Investment may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Varun Beverages and Cholamandalam Investment

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

The idea behind Varun Beverages Limited and Cholamandalam Investment and 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.