Correlation Between Varun Beverages and Kalyani Steels

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

Diversification Opportunities for Varun Beverages and Kalyani Steels

0.47

Correlation Coefficient

Varun Beverages  Kalyani Steels

Very weak diversification

The 3 months correlation between Varun and Kalyani is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and Kalyani Steels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kalyani Steels 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 Kalyani Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kalyani Steels has no effect on the direction of Varun Beverages i.e., Varun Beverages and Kalyani Steels go up and down completely randomly.

Pair Corralation between Varun Beverages and Kalyani Steels

Assuming the 90 days trading horizon Varun Beverages Limited is expected to under-perform the Kalyani Steels. But the stock apears to be less risky and, when comparing its historical volatility, Varun Beverages Limited is 1.17 times less risky than Kalyani Steels. The stock trades about 0.0 of its potential returns per unit of risk. The Kalyani Steels Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  91,452  in Kalyani Steels Limited on September 23, 2024 and sell it today you would earn a total of  26,003  from holding Kalyani Steels Limited or generate 28.43% return on investment over 90 days.

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

Varun Beverages Limited  vs.  Kalyani Steels Limited

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.

Kalyani Steels

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kalyani Steels Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Kalyani Steels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Varun Beverages and Kalyani Steels

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

The idea behind Varun Beverages Limited and Kalyani Steels 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.