Correlation Between Varun Beverages and Home First

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

Diversification Opportunities for Varun Beverages and Home First

-0.61

Correlation Coefficient

Varun Beverages  Home First

Excellent diversification

The 3 months correlation between Varun and Home is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and Home First Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home First Finance 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 Home First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home First Finance has no effect on the direction of Varun Beverages i.e., Varun Beverages and Home First go up and down completely randomly.

Pair Corralation between Varun Beverages and Home First

Assuming the 90 days trading horizon Varun Beverages is expected to generate 1.83 times less return on investment than Home First. But when comparing it to its historical volatility, Varun Beverages Limited is 1.27 times less risky than Home First. It trades about 0.07 of its potential returns per unit of risk. Home First Finance is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  103,625  in Home First Finance on October 8, 2024 and sell it today you would earn a total of  3,180  from holding Home First Finance or generate 3.07% return on investment over 90 days.

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

Varun Beverages Limited  vs.  Home First Finance

Varun Beverages

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Varun Beverages Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Varun Beverages may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Home First Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home First Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Varun Beverages and Home First

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

The idea behind Varun Beverages Limited and Home First Finance 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 Commodity Directory module to find actively traded commodities issued by global exchanges.