Correlation Between Varun Beverages and KIOCL

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

Diversification Opportunities for Varun Beverages and KIOCL

0.0

Correlation Coefficient

Varun Beverages  KIOCL

Pay attention - limited upside

The 3 months correlation between Varun and KIOCL is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited 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 KIOCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIOCL Limited has no effect on the direction of Varun Beverages i.e., Varun Beverages and KIOCL go up and down completely randomly.

Pair Corralation between Varun Beverages and KIOCL

Assuming the 90 days trading horizon Varun Beverages Limited is expected to under-perform the KIOCL. But the stock apears to be less risky and, when comparing its historical volatility, Varun Beverages Limited is 3.24 times less risky than KIOCL. The stock trades about -0.11 of its potential returns per unit of risk. The KIOCL Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  38,515  in KIOCL Limited on October 10, 2024 and sell it today you would earn a total of  4,535  from holding KIOCL Limited or generate 11.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Varun Beverages Limited  vs.  KIOCL Limited

Varun Beverages

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Varun Beverages Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

KIOCL Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KIOCL Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, KIOCL displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Varun Beverages and KIOCL

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

The idea behind Varun Beverages Limited and KIOCL Limited 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.