Correlation Between Varun Beverages and State Trading

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

Diversification Opportunities for Varun Beverages and State Trading

0.3

Correlation Coefficient

Varun Beverages  State Trading

Weak diversification

The 3 months correlation between Varun and State is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Varun Beverages Limited and The State Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Trading 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 State Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Trading has no effect on the direction of Varun Beverages i.e., Varun Beverages and State Trading go up and down completely randomly.

Pair Corralation between Varun Beverages and State Trading

Assuming the 90 days trading horizon Varun Beverages Limited is expected to generate 0.51 times more return on investment than State Trading. However, Varun Beverages Limited is 1.95 times less risky than State Trading. It trades about 0.19 of its potential returns per unit of risk. The State Trading is currently generating about 0.03 per unit of risk. If you would invest  61,890  in Varun Beverages Limited on October 5, 2024 and sell it today you would earn a total of  3,330  from holding Varun Beverages Limited or generate 5.38% return on investment over 90 days.

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

Varun Beverages Limited  vs.  The State Trading

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.

State Trading

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The State Trading are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, State Trading may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Varun Beverages and State Trading

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

The idea behind Varun Beverages Limited and The State Trading 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.