Correlation Between Varun Beverages and Cholamandalam Financial

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

Diversification Opportunities for Varun Beverages and Cholamandalam Financial

0.02

Correlation Coefficient

Varun Beverages  Cholamandalam Financial

Significant diversification

The 3 months correlation between Varun and Cholamandalam is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and Cholamandalam Financial Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cholamandalam Financial 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 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cholamandalam Financial has no effect on the direction of Varun Beverages i.e., Varun Beverages and Cholamandalam Financial go up and down completely randomly.

Pair Corralation between Varun Beverages and Cholamandalam Financial

Assuming the 90 days trading horizon Varun Beverages Limited is expected to under-perform the Cholamandalam Financial. In addition to that, Varun Beverages is 1.34 times more volatile than Cholamandalam Financial Holdings. It trades about -0.26 of its total potential returns per unit of risk. Cholamandalam Financial Holdings is currently generating about 0.15 per unit of volatility. If you would invest  152,390  in Cholamandalam Financial Holdings on December 2, 2024 and sell it today you would earn a total of  11,800  from holding Cholamandalam Financial Holdings or generate 7.74% return on investment over 90 days.

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

Varun Beverages Limited  vs.  Cholamandalam Financial Holdin

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 uncertain 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.

Cholamandalam Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cholamandalam Financial Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Cholamandalam Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Varun Beverages and Cholamandalam Financial

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

The idea behind Varun Beverages Limited and Cholamandalam Financial Holdings 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.