Correlation Between Varun Beverages and Oriental Carbon

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

Diversification Opportunities for Varun Beverages and Oriental Carbon

-0.36

Correlation Coefficient

Varun Beverages  Oriental Carbon

Very good diversification

The 3 months correlation between Varun and Oriental is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and Oriental Carbon Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Carbon Chemicals 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 Oriental Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Carbon Chemicals has no effect on the direction of Varun Beverages i.e., Varun Beverages and Oriental Carbon go up and down completely randomly.

Pair Corralation between Varun Beverages and Oriental Carbon

Assuming the 90 days trading horizon Varun Beverages Limited is expected to generate 5.0 times more return on investment than Oriental Carbon. However, Varun Beverages is 5.0 times more volatile than Oriental Carbon Chemicals. It trades about 0.06 of its potential returns per unit of risk. Oriental Carbon Chemicals is currently generating about -0.02 per unit of risk. If you would invest  24,436  in Varun Beverages Limited on October 12, 2024 and sell it today you would earn a total of  35,219  from holding Varun Beverages Limited or generate 144.13% return on investment over 90 days.

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

Varun Beverages Limited  vs.  Oriental Carbon Chemicals

Varun Beverages

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Varun Beverages Limited are ranked lower than 1 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Oriental Carbon Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oriental Carbon Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Varun Beverages and Oriental Carbon

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

The idea behind Varun Beverages Limited and Oriental Carbon Chemicals 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..