Correlation Between Varun Beverages and Geojit Financial

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

Diversification Opportunities for Varun Beverages and Geojit Financial

-0.02

Correlation Coefficient

Varun Beverages  Geojit Financial

Good diversification

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

Pair Corralation between Varun Beverages and Geojit Financial

Assuming the 90 days trading horizon Varun Beverages Limited is expected to generate 6.73 times more return on investment than Geojit Financial. However, Varun Beverages is 6.73 times more volatile than Geojit Financial Services. It trades about 0.06 of its potential returns per unit of risk. Geojit Financial Services is currently generating about 0.08 per unit of risk. If you would invest  25,859  in Varun Beverages Limited on September 26, 2024 and sell it today you would earn a total of  36,871  from holding Varun Beverages Limited or generate 142.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Varun Beverages Limited  vs.  Geojit Financial Services

Varun Beverages

Risk-Adjusted Performance

0 of 100

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 rather sound technical and fundamental indicators, Varun Beverages is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Geojit Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Geojit Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Varun Beverages and Geojit Financial

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

The idea behind Varun Beverages Limited and Geojit Financial Services 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.