Correlation Between Varun Beverages and Gujarat Lease

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

Diversification Opportunities for Varun Beverages and Gujarat Lease

0.3

Correlation Coefficient

Varun Beverages  Gujarat Lease

Weak diversification

The 3 months correlation between Varun and Gujarat is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and Gujarat Lease Financing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Lease Financing 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 Gujarat Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Lease Financing has no effect on the direction of Varun Beverages i.e., Varun Beverages and Gujarat Lease go up and down completely randomly.

Pair Corralation between Varun Beverages and Gujarat Lease

Assuming the 90 days trading horizon Varun Beverages Limited is expected to under-perform the Gujarat Lease. But the stock apears to be less risky and, when comparing its historical volatility, Varun Beverages Limited is 1.12 times less risky than Gujarat Lease. The stock trades about 0.0 of its potential returns per unit of risk. The Gujarat Lease Financing is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  719.00  in Gujarat Lease Financing on September 25, 2024 and sell it today you would earn a total of  31.00  from holding Gujarat Lease Financing or generate 4.31% return on investment over 90 days.

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

Varun Beverages Limited  vs.  Gujarat Lease Financing

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Gujarat Lease Financing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Gujarat Lease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Varun Beverages and Gujarat Lease

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

The idea behind Varun Beverages Limited and Gujarat Lease Financing 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.

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..