Correlation Between Varun Beverages and Reliance Industries

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

Diversification Opportunities for Varun Beverages and Reliance Industries

0.1

Correlation Coefficient

Varun Beverages  Reliance Industries

Average diversification

The 3 months correlation between Varun and Reliance is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and Reliance Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Industries 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 Reliance Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Industries has no effect on the direction of Varun Beverages i.e., Varun Beverages and Reliance Industries go up and down completely randomly.

Pair Corralation between Varun Beverages and Reliance Industries

Assuming the 90 days trading horizon Varun Beverages is expected to generate 1.56 times less return on investment than Reliance Industries. In addition to that, Varun Beverages is 1.1 times more volatile than Reliance Industries Limited. It trades about 0.02 of its total potential returns per unit of risk. Reliance Industries Limited is currently generating about 0.04 per unit of volatility. If you would invest  124,165  in Reliance Industries Limited on September 20, 2024 and sell it today you would earn a total of  1,160  from holding Reliance Industries Limited or generate 0.93% 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.  Reliance Industries 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries 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 basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Varun Beverages and Reliance Industries

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

The idea behind Varun Beverages Limited and Reliance Industries 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.