Correlation Between Varun Beverages and Indian OilLimited

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

Diversification Opportunities for Varun Beverages and Indian OilLimited

0.89

Correlation Coefficient

Varun Beverages  Indian OilLimited

Very poor diversification

The 3 months correlation between Varun and Indian is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and Indian Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian OilLimited 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 Indian OilLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian OilLimited has no effect on the direction of Varun Beverages i.e., Varun Beverages and Indian OilLimited go up and down completely randomly.

Pair Corralation between Varun Beverages and Indian OilLimited

Assuming the 90 days trading horizon Varun Beverages Limited is expected to under-perform the Indian OilLimited. In addition to that, Varun Beverages is 1.43 times more volatile than Indian Oil. It trades about -0.07 of its total potential returns per unit of risk. Indian Oil is currently generating about -0.03 per unit of volatility. If you would invest  13,784  in Indian Oil on December 22, 2024 and sell it today you would lose (633.00) from holding Indian Oil or give up 4.59% of portfolio value over 90 days.

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

Varun Beverages Limited  vs.  Indian Oil

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.

Indian OilLimited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indian Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Indian OilLimited is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Varun Beverages and Indian OilLimited

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

The idea behind Varun Beverages Limited and Indian Oil 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.