Correlation Between Varun Beverages and Maharashtra Scooters

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

Diversification Opportunities for Varun Beverages and Maharashtra Scooters

-0.63

Correlation Coefficient

Varun Beverages  Maharashtra Scooters

Excellent diversification

The 3 months correlation between Varun and Maharashtra is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and Maharashtra Scooters Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maharashtra Scooters 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 Maharashtra Scooters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maharashtra Scooters has no effect on the direction of Varun Beverages i.e., Varun Beverages and Maharashtra Scooters go up and down completely randomly.

Pair Corralation between Varun Beverages and Maharashtra Scooters

Assuming the 90 days trading horizon Varun Beverages is expected to generate 1.13 times less return on investment than Maharashtra Scooters. In addition to that, Varun Beverages is 1.85 times more volatile than Maharashtra Scooters Limited. It trades about 0.12 of its total potential returns per unit of risk. Maharashtra Scooters Limited is currently generating about 0.24 per unit of volatility. If you would invest  940,995  in Maharashtra Scooters Limited on October 6, 2024 and sell it today you would earn a total of  32,810  from holding Maharashtra Scooters Limited or generate 3.49% 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.  Maharashtra Scooters Limited

Varun Beverages

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Varun Beverages Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Varun Beverages exhibited solid returns over the last few months and may actually be approaching a breakup point.

Maharashtra Scooters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maharashtra Scooters Limited 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Varun Beverages and Maharashtra Scooters

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

The idea behind Varun Beverages Limited and Maharashtra Scooters 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.