Correlation Between Varun Beverages and Lakshmi Finance

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

Diversification Opportunities for Varun Beverages and Lakshmi Finance

-0.58

Correlation Coefficient

Varun Beverages  Lakshmi Finance

Excellent diversification

The 3 months correlation between Varun and Lakshmi is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and Lakshmi Finance Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakshmi Finance Indu 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 Lakshmi Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakshmi Finance Indu has no effect on the direction of Varun Beverages i.e., Varun Beverages and Lakshmi Finance go up and down completely randomly.

Pair Corralation between Varun Beverages and Lakshmi Finance

Assuming the 90 days trading horizon Varun Beverages Limited is expected to generate 5.45 times more return on investment than Lakshmi Finance. However, Varun Beverages is 5.45 times more volatile than Lakshmi Finance Industrial. It trades about 0.06 of its potential returns per unit of risk. Lakshmi Finance Industrial is currently generating about 0.06 per unit of risk. If you would invest  24,193  in Varun Beverages Limited on October 10, 2024 and sell it today you would earn a total of  37,627  from holding Varun Beverages Limited or generate 155.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Varun Beverages Limited  vs.  Lakshmi Finance Industrial

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

Lakshmi Finance Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lakshmi Finance Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Varun Beverages and Lakshmi Finance

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

The idea behind Varun Beverages Limited and Lakshmi Finance Industrial 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.