Correlation Between Varun Beverages and Patanjali Foods

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

Diversification Opportunities for Varun Beverages and Patanjali Foods

0.18

Correlation Coefficient

Varun Beverages  Patanjali Foods

Average diversification

The 3 months correlation between Varun and Patanjali is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and Patanjali Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patanjali Foods 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 Patanjali Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patanjali Foods has no effect on the direction of Varun Beverages i.e., Varun Beverages and Patanjali Foods go up and down completely randomly.

Pair Corralation between Varun Beverages and Patanjali Foods

Assuming the 90 days trading horizon Varun Beverages Limited is expected to under-perform the Patanjali Foods. In addition to that, Varun Beverages is 2.22 times more volatile than Patanjali Foods Limited. It trades about -0.09 of its total potential returns per unit of risk. Patanjali Foods Limited is currently generating about 0.05 per unit of volatility. If you would invest  172,030  in Patanjali Foods Limited on December 26, 2024 and sell it today you would earn a total of  5,450  from holding Patanjali Foods Limited or generate 3.17% return on investment over 90 days.

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

Varun Beverages Limited  vs.  Patanjali Foods Limited

Varun Beverages

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Patanjali Foods

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Patanjali Foods Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Patanjali Foods is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Varun Beverages and Patanjali Foods

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

The idea behind Varun Beverages Limited and Patanjali Foods 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.